VW considering buying Fiat?

[smk4565]

Ferdinand Piech reportedly has a grand plan to make VW the #1 auto manufacturer in the world by buying up Fiat-Chrysler.  VW has $24 billion in cash so they have the money to buy controlling interest in FCA, assuming they could get the regulatory approvals.  He would then revive the Auto Union name to be the parent company with Fiat, VW, Jeep, Chrysler/Dodge and a luxury group of Alfa Romeo, Audi, Bentley, Bugatti, Lamborghini, Maserati and Porsche.  This would give VW a substantial lead in global sales volume over GM or Toyota.

 

Full Story at link:

 

http://europe.autonews.com/article/20140721/COPY/307259994/a-vw-fca-deal-would-be-risky-reasonable

[smk4565]

I for one would like to see the Auto Union comeback, the potential of this deal would be huge, but they would have to shudder some brands in the process.  VW would gain in markets they are weak though, and the economies of scale could really come to be a big advantage.  I see it like this:

 

Fiat does what it does with the compact cars, VW could build a future Up! off the Fiat 500 platform.

VW adds the Chrysler minivan and a 300C based RWD sedan to  slot above the Passat, Chrysler brand is shut down.

VW adds Ram pickups in global markets outside the USA, a small pickup could be sold under Ram name here and VW name abroad.

 

Jeep expands globally since the Cherokee can be built in Fiat/Alfa factories, as could the Renegade.  Future Grand Cherokee, Toureg and Cayenne could platform share.

 

Maserati could platform share with Audi, which gets the A8 and A6 on a RWD platform.  Quattroporte, A8 and Bentley Continental/Flying Spur would platform share, Ghibli and A6 could also.  They could share a lot of engines and transmissions also.

 

Alfa Romeo expands globally as the smaller, more value oriented performance/luxury brand.  The Mito and Giulietta would platform share with the Fiat 500/VW Up! and VW Golf.  I think Alfa could potentially replace Dodge, but the Charger/Challenger wouldn't fit in with Alfa.

[Z-06]

And you say 4 brands is a lot for GM. How would a bratwurst linguini with grits feel for you here?

[FAPTurbo]

This is awesome news for fans of bad quality and lack of competition! 

[A Horse With No Name]

Since the Routan worked out so well for VW.....ughhh....

 

I love their diesels and the GTI, but VW is pretty much irrelevant everywhere else.  Audi does well here, but if Vw changes its product mix substantially, they could muck that up.

 

We will see....

 

...and since German ownership of Chrysler worked out so well when the Benz people owned it....

 

GM may well own the American automarket from the simple standpoint of all of the competition melting down doing stupid stuff.

[David]

Yes let VW Buy Fiat and Melt Down. The market has too many so might as well clean out the Rif Raf and move on. Then we will start to see the Chinese fill in the gap.

[smk4565]

If VW bought Fiat they would be producing about 14 million cars per year, I'd imagine they would have to phase out some brands, Skoda and Seat could surely go away. But you do wonder if it is manageable, or if they will try.

[Z-06]

Inorganic growth in name of #1 sales was one of the reasons that brought GM down. VW is going that route faster. Piech said goal of 800,000 cars by 2018 in US, didn't say how. Well through inorganic growth is the answer.

 

Sometime I wonder, after Porsche-VW takeover fiasco, if VW is playing accounting shell game.

 

And Mr. Piech, learn from experience, Fiat took $2B+ from GM by divorcing before the marriage.

[David]

If VW bought Fiat they would be producing about 14 million cars per year, I'd imagine they would have to phase out some brands, Skoda and Seat could surely go away. But you do wonder if it is manageable, or if they will try.

Socialist European unions will be hell for VW to deal with as they do need to shed surplus capacity and reduce head count.

Inorganic growth in name of #1 sales was one of the reasons that brought GM down. VW is going that route faster. Piech said goal of 800,000 cars by 2018 in US, didn't say how. Well through inorganic growth is the answer.

 

Sometime I wonder, after Porsche-VW takeover fiasco, if VW is playing accounting shell game.

 

And Mr. Piech, learn from experience, Fiat took $2B+ from GM by divorcing before the marriage.

Could be a way for Chrysler to become an independent American company again.

[A Horse With No Name]

If VW bought Fiat they would be producing about 14 million cars per year, I'd imagine they would have to phase out some brands, Skoda and Seat could surely go away. But you do wonder if it is manageable, or if they will try.

Skoda and Seat are part of the European marketing strategy and will not go away.

If VW bought Fiat they would be producing about 14 million cars per year, I'd imagine they would have to phase out some brands, Skoda and Seat could surely go away. But you do wonder if it is manageable, or if they will try.

Socialist European unions will be hell for VW to deal with as they do need to shed surplus capacity and reduce head count.

Inorganic growth in name of #1 sales was one of the reasons that brought GM down. VW is going that route faster. Piech said goal of 800,000 cars by 2018 in US, didn't say how. Well through inorganic growth is the answer.

 

Sometime I wonder, after Porsche-VW takeover fiasco, if VW is playing accounting shell game.

 

And Mr. Piech, learn from experience, Fiat took $2B+ from GM by divorcing before the marriage.

Could be a way for Chrysler to become an independent American company again.

Chrysler will probably never be independent and American again...

[Z-06]

I somehow feel prophetic.

 

Sometime I wonder, after Porsche-VW takeover fiasco, if VW is playing accounting shell game.

 

[smk4565]

Perhaps this is where Piech's grand plan could come into play.  If he could add Jeep and Maserati to the VW portfolio, he'd have 2 brands that are solid on a profitability basis.  To get VW more profitable he could streamline Chrysler's and Fiat's products into VW, get more sales out of VW without really having to spend more on development costs.  Plus if VW took over FCA then you don't need all that duplicate payroll, HR, accounting, etc.  They can streamline there also.

 

More likely though they'll just cut jobs and downsize, but few companies really cut their way to prosperity.

[David]

Totally agree with SMK that VW could take over FCA and streamline it by eliminating duplication, but if the company thinks it can cut its way to prosperity, they are in for a rude surprise and major failure.

[A Horse With No Name]

VW is already hugely profitable. They make $20k plus on every Porsche they sell, they cannot keep Audi's on the lot, and they sell an assload of cars in Asia, Europe,and South America. Will be interesting to see what happens.

[Z-06]

Perhaps this is where Piech's grand plan could come into play.  If he could add Jeep and Maserati to the VW portfolio, he'd have 2 brands that are solid on a profitability basis.  To get VW more profitable he could streamline Chrysler's and Fiat's products into VW, get more sales out of VW without really having to spend more on development costs.  Plus if VW took over FCA then you don't need all that duplicate payroll, HR, accounting, etc.  They can streamline there also.

 

More likely though they'll just cut jobs and downsize, but few companies really cut their way to prosperity.

 

 

Totally agree with SMK that VW could take over FCA and streamline it by eliminating duplication, but if the company thinks it can cut its way to prosperity, they are in for a rude surprise and major failure.

 

Easier said than done. Soft points like clash of cultures, middle management ego and status quo overtake those benefits. Marchionne has already declared war on VW within European Automotive Manufacturing Association politics, do you think his rank and flank is going to let go easy? And what about friends, supporters, sympathizers of these 20,000 being laid of in advance of your hypothetical synergy? You are cutting limbs of your own trees to add stems of another, that is going to sit well with unions and share holders. Union politics is dirtier in Europe. Even marriage of equals with MB and Chrysler worked fantastically!

[2QuickZ's]

Let's not forget that any attempt to "streamline" the Chrysler brands and fold them into VW in the U.s. would likely be a disaster.  Even though Chrysler has been mostly foreign owned for the last couple of decades, if you killed off the Chrysler and Dodge brands and threw VW badges on the same products, sales would plummet.  It's not that easy.  VW would have to keep Dodge and especially Ram around along with Jeep.  The Chrysler brand would be the only one ripe for a shut down but even at that, you would be killing the namesake brand and would probably take consumer perception of the other brands down with it.

[A Horse With No Name]

I find it unlikely that Chrysler would go away.

[smk4565]

Good points on several accounts.  I think the Chrsyler brand is the one to dump, becaue VW could sell a minivan and they could take the 300 and turn it into a VW Phaeton priced in the $36-50k range, it could still be a large RWD american flavor sedan, but with more of a VW look inside and out, and then you don't have an $75k Phaeton that no one is going to buy, and it gives VW a car above the Passat, and it splits the Charger and "new Phaeton" out of the same price point.  Rename the Chrysler 200 and give it to Dodge to replace that awful Avenger, then Dodge and VW both have strong lineups.  Jeep is in good shape, with VW's European and South American sales network they can sell more cars there.  The luxury brands do well, not much needed to do there.

 

They would have to make layoffs in certain places obviously, but maybe not 20,000.  The problem for Volkswagen is the VW brand doesn't make a lot of profit but they can't really expect them to produce Audi-like profit margins.

 

Ferdinand Piech is worth over $5 billion, maybe Piech should have had this idea a few years ago and just bought Chrysler himself and forced a merger.  He is 77 years old, so if he wants to create a lasting legacy he better move quickly.

[A Horse With No Name]

The Routan was a sales flop for VW....Chryco sells minivans like arms merchants sell bullets and missiles in the middle east.  Why would they piss away that valuable and profitable business by doing away with the inherent brand equity in Chryco Minivans?  Look at what happened when GM pissed away their brand equity in Pontiac, Oldsmobile, and the like....

 

Back in the seventies you could swing a dead cat by its tail anywhere in our country and hit a dozen Olds Cultas.  How many cuttys do you see being sold new today?

 

Do you think people would buy a 300 with a VW badge on it?  Remember the sales flop that was the Phaeton, VW sold like 3000 of them right?

 

VW could be very profitable here.  Subaru and Mazda are making lots of money as niche market players because they understand their product, their market and their mission...and they stay on target.  Things that cannot be said for Volkswagen. 

 

I somehow feel prophetic.

 

Sometime I wonder, after Porsche-VW takeover fiasco, if VW is playing accounting shell game.

 

 

 

 

Of all of the people here, I trust you as much as anyone....although you lack the beard, robes and messianic following to be a prophet.

[Z-06]

 

I somehow feel prophetic.

 

Sometime I wonder, after Porsche-VW takeover fiasco, if VW is playing accounting shell game.

 

 

 

 

Of all of the people here, I trust you as much as anyone....although you lack the beard, robes and messianic following to be a prophet.

 

I am no way that. I prefer to fly under the radar, observe, listen and learn.

[Drew Dowdell]

The trouble for VW in the US is that they have solid platforms and then drop the ball on the interior and most of the powertrains.  The current Passat feels like a tank akin to the big old MBs, but the interior is such a let-down and only gets worse the more you spend because only things like seats and steering wheels get upgrades while the door panels and dashboards remain cheap feeling plastic.  The 2.5 was a terrible motor with V6 like fuel economy and 4-cylinder like performance... sure, they've replaced it with a new 1.8T, but the Passat and Jetta have been selling for 3 - 6 years with that motor, so that is a lot of impressions formed.   The DSG is a fantastic transmission for those who know what it does... but if all you're doing is buying a VW to commute in traffic, the transmission's hesitation and uncertainty of the world around it in heavy traffic lead a non-knowledgeable driver to think there is something wrong with their car.

[A Horse With No Name]

Again, they will never ever ever be anything but a niche player here in the USA.

[jabay]

I think that a buy out as big as that would really help VW break into the extremely affordable car market. That would make them serious players and contenders in the aute world. they would most likely be able to take on Toyota. Fiat on its own would not be able to break through in the same way VW has across the globe and i think that would be good. The fiat production quality would also go above and beyond where it currently is.