Fiat-Chrysler would benefit from an alliance with PSA

Luca Ciferri is Automotive News Europe's chief correspondentLuca Ciferri is Automotive News Europe's chief correspondent
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Sergio Marchionne says he may consider a third partner for Fiat-Chrysler but denies he is talking with PSA/Peugeot Citroen or Opel.

Marchionne had dinner with PSA/Peugeot-Citroen chief Phillippe Varin during the Detroit auto show but said afterward, "we did not discuss Fiat and PSA."

The dinner was the annual gathering of the European, U.S. and Japanese automaker associations. Marchionne is chairman of ACEA, the European automakers' lobby group.

Marchionne's comments followed his earlier remarks that Fiat-Chrysler may need a partner to create the necessary car manufacturing efficiencies to survive in today's market. This sparked reports in the Italian press that Fiat and PSA, Europe's second-largest carmaker after Volkswagen, are ready to discuss a possible alliance.

The possibility of a tie-up between PSA and Fiat has been mentioned repeatedly by sector analysts, but the speculation has so far come to nothing.

Three years ago, Marchionne failed to bring General Motors Co.'s Opel unit into Fiat-Chrysler. Marchionne has now given up on that idea. "A tie-up of Fiat with Opel now looks almost impossible, as Chrysler competes in the U.S. with GM models built on the same vehicle architectures as Opel vehicles," he said.

Marchionne is still firm in his belief that the global auto industry, and Europe in particular, needs a new round of consolidation. "At best, I see the European market flat at the 2011 level until 2014 and on such a volume it's almost impossible to make money," he said.

European volume automakers can either use spare capacity in Europe to export, as BMW, Mercedes-Benz and Audi do, or they need to shut down plants, the CEO said.

He sees the VW Group as the industry's most effective multibrand industrial machine, combining strong component sharing with clear brand and product differentiation. "We should not copy VW, but study it and improve their business model to become more effective," he said. "Being small, diverse and beautiful doesn't mean anything."

Fiat and Chrysler aim to sell about 4.6 million units in 2012, up from 4.2 million units last year. In 2014, Marchionne wants the two automakers to sell a combined 5.9 million, but they may fall 200,000 to 300,000 units short of the goal due to the weakness of the European market.

In 2008, Marchionne said successful automakers needed annual sales of about 6 million units to be cost effective. His new paradigm is sales of 8 million to 10 million units a year. Only GM, Toyota and VW come close to that scale, meaning Fiat-Chrysler needs another partner.

French pride may not tolerate PSA becoming a junior partner in a three-way tie-up with Fiat and Chrysler, but such a move makes a lot of sense.

The European market will be weak or worse in the years to come, so industrial logic should be the deciding factor, particularly for PSA, the most Europe-centric of all the region's automakers.

You can reach Luca Ciferri at

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