Earlier this week, Chinese automaker Great Wall announced its intentions of possibly buying Jeep. It was hoping to make contact with Fiat Chrysler Automobiles about starting negotiations. But just a day later, Great Wall has poured a bucket of cold water on their plans.
In a recent filing to the Shanghai stock exchange, Great Wall said there are “big uncertainties” with FCA and isn't sure if it will continue investigating it. The company also stated they have not made any contact with Fiat's board.
"The company has not built any relationship with the directors of FCA nor has the company entered into any discussion or signed any agreements with any officer of FCA so far," Great Wall said in the filing.
On this news, Great Wall's share price went into freefall on Tuesday that the Shanghai stock exchange put a halt on trading.
Analysts find it hard to see FCA selling Jeep alone, as it is the crown jewel in their lineup. There are also the concerns of getting government approval. A recent report from Deutsche Bank AG said Great Wall could run into issues with getting approval from the Chinese government as restrictions have been placed on capital outflow. There is also the political ramifications in the U.S. due to President Donald Trump.
Source: Bloomberg, Reuters
Trying to figure what is going with Fiat Chrysler Automobiles and Jeep could be a full-time job. This week has seen Chinese Automaker Great Wall announce its intentions of possibly buying Jeep from FCA, before backtracking on that a day later. Then rumors surfaced that FCA is considering spinning off Maserati and Alfa Romeo, along with its components operations. Now there is another twist.
According to a report from Bloomberg, FCA believes Jeep could sell as many vehicles as a standalone automaker thanks to the increased demand for SUVs. The company forecasts that Jeep's annual sales will rise 30 percent to two million next year. FCA CEO Sergio Marchionne told analysts that the brand could deliver up to seven million vehicles a year if demand for SUVs keeps rising.
But for Jeep to reach that ambitious sales goal, they would need to have their lineup (including the new Wrangler, Wagoneer, Grand Wagoneer) to sell 50 percent more vehicles than what FCA delivered last year.
“It seems pretty pie-in-the-sky at this point,” said Richard Hilgert, an autos analyst at Morningstar.
Hilgert does also note most observers thought it was crazy that Jeep could expand to 2 million in annual sales by 2018 - something that is likely to happen.
Marchionne also talked about why it would be a bad idea to split Jeep away from FCA.
“We do need to worry about the stump that’s left behind,” Marchionne said.
“If we start picking away all the things that appear to be interesting to people, then I think we’re going to end up with a sub-optimal business that cannot run.”
It should be noted that only a few months ago, Marchionne floated the idea of spinning off Jeep.
The relationship between Fiat Chrysler Automobiles and Volkswagen has been frosty, to say the least when it comes to a possible merger - Volkswagen has said no to this idea. But it appears the two have been talking about possible alliance when it comes to certain light utility vehicles.
The Wall Street Journal has learned from a source that the two companies held discussions on producing some light-duty vehicles such as the Caddy van (Transit Connect and ProMaster City sized) and Amarok pickup. The source said the talks are still at an early stage.
"It's still very vague, we have to see if this will be pursued," said the source.
If these discussions do go somewhere, it might give Ram something it badly needs in the U.S.; a midsize pickup.
Also, sources tell the paper that Volkswagen "isn’t currently eyeing the Jeep unit itself, or considering a takeover bid for Fiat Chrysler." They're still dealing with the fallout from the diesel emission scandal.
Source: The Wall Street Journal (Subscription Required)
It is no secret that Sergio Marchionne has been looking for a buyer to take on Fiat Chrysler Automobiles for the past two years. But no one seemed seriously interested.
That has changed.
Automotive News has learned from various sources that a number of Chinese automakers are conducting appraisals into FCA, with some meeting with representatives of U.S. retail groups about a potential acquisition last week. One source revealed that FCA executives have traveled to China to meet with Great Wall Motor Co. and that Chinese delegations were at FCA's HQ. AN also reports that a well-known Chinese automaker has put forth an offer this month for the company, but was turned down as it wasn't enough money to do a sale.
It is unclear which Chinese automakers are looking at FCA. Aside from Great Wall, sources say Dongfeng Motor Corp., Zhejiang Geely Holding Group, and Guangzhou Automobile Group (FCA's joint venture partner in China) are interested. Unsurprisingly, FCA and the Chinese automakers are keeping their mouths shut.
Why are Chinese automakers suddenly interested in FCA? Part of it comes from the government putting pressure on companies to expand beyond China. A government directive called China Outbound is pushing Chinese companies "to acquire international assets from their industries and operate them "to make their mark."
"Right now, Chinese automakers enjoy the full support of the leadership in Beijing to go and make it happen. That's something brand new, and it's really picked up since 2015," said Michael Dunne, president of Dunne Automotive based in Hong Kong.
A key example is Geely acquiring Volvo back in 2010.
Also, FCA provides Chinese Automakers wanting to enter the U.S. something akin to a turnkey operation. FCA has about 2,600 dealers in the U.S., along with extensive networks in Canada and Mexico. Worldwide, FCA has 162 manufacturing operations and 87 research and development centers - something that would appeal to Chinese Automakers.
So if a deal was worked out, what would a Chinese Automaker be getting? According to a source, the sale would include Jeep and Ram Trucks - FCA's profit makers, along with Chrysler, Dodge, and Fiat. Alfa Romeo and Maserati would be spun off to maximize returns for Exor - holding company controlled by Agnelli family which holds a controlling interest in FCA.
Source: Automotive News (Subscription Required)