Did Sergio get it right?

Six superstars ponder the future of an 'irrational' auto industry

Sergio Marchionne says the auto industry is broken. Is he right or was he simply putting FCA up for sale? We asked six superstar industry thinkers to discuss the matter in detail: Bo Andersson, Arndt Ellinghorst, John Krafcik, Bob Lutz, Tim Manganello and Andy Palmer. They all see an industry with huge challenges.

CAPITAL CRUNCH

New-vehicle sales in the U.S. are on track for the second-best year in history. So why do so many smart people believe the auto industry is in a desperate situation?

Return on investment: Not a pretty picture

Last spring, General Motors began breaking out a new metric in its financial disclosures: return on invested capital. The relatively arcane financial metric is at the root of the debate sparked by Fiat Chrysler Automobiles CEO Sergio Marchionne.

Who will pay rising development costs?

Regulators and consumers keep demanding that automakers pack more features and equipment into vehicles. But all of that comes at a cost -- which somebody ultimately has to pay.

R&D SPENDING: HOW MUCH IS POINTLESS?

Carmakers spend billions to differentiate components "not discernible to consumers," says Sergio Marchionne. Does every carmaker really need its own 1.3 liter 4-cylinder engine? Its own axles? There are strongly-held beliefs on both sides.

Duplicating vehicle engineering
pushes costs and prices higher

Since the beginning of 2012, at least 12 major global automakers have introduced or announced plans to launch small, three-cylinder engines. The estimated total cost to engineer those distinct, proprietary three-cylinders: a staggering $10 billion to $12 billion.

Dealers fret over prices, split on parts sharing

Rising costs will cut into vehicle sales, hurting auto retailers. And while more parts sharing among automakers could help trim costs and keep new cars affordable, dealers say there are limits to doing so, an online, unscientific survey of auto retailers by Automotive News found.

Automotive News surveyed dealers on pricing trends and what greater parts sharing by automakers might mean at the retail level. Here's what they said:

SURVEY: Price worries? Yes.

SURVEY: Parts sharing? Hmmm ...

EDITORIAL: Industry must stop wasteful spending before it's too late

MERGE OR DIE? IS CONSOLIDATION THE SOLUTION FOR AN 'IRRATIONAL' INDUSTRY?

Mergers always flop, right? Not so. We look at the handful of mergers/long-term collaborations that were successful, and ask: why did they work?

Rare alliance successes share key traits

The automotive industry landscape is littered with the carcasses of failed alliances, yet the truth is some marriages do produce positive results. Fiat and Chrysler are both healthier now, and Renault and Nissan have been working together for two decades. What makes some mergers or alliances work?

DaimlerChrysler: Poster child of failed mergers

Sergio Marchionne says automakers consume too much capital. His solution: mergers and alliances. But few deals destroyed more capital than the historic 1998 union that created DaimlerChrysler AG. Here's how it went wrong.

COMMENTARY: M&A fever's hefty toll on talent

EDITORIAL: Is a merger the way to go? Automakers better know history

THE STATE OF FIAT CHRYSLER AUTOMOBILES

Analyst Arndt Ellinghorst says Fiat Chrysler CEO Sergio Marchionne is "running a company which is probably the most challenged within the global industry." So is Marchionne's "Confessions of a Capital Junkie" just a fancy way of putting FCA up for sale? Marchionne says no. Neither is it "an excuse for FCA's current ranking in the automotive food chain," he says.
Still, why do so many people have such grave doubts about an automaker that keeps setting sales records in the United States?

FCA chief wants tie-up with GM; GM's response: 'Why bail out FCA?'

General Motors has flatly rejected the advances of its crosstown rival, Fiat Chrysler Automobiles, but FCA CEO Sergio Marchionne is not going away - not by a long shot. Marchionne says he has sweated the details and done the math and discovered there's far too much upside in a merger of FCA and GM to let a deal go undone - or at least unexplored.

Jeep helping to power FCA in Europe

Thanks to a strong start for the Jeep Renegade and its sibling, the Fiat 500X, Fiat Chrysler's sales in Europe are recovering faster than the overall market.

How GM and FCA could come together

Mergers, of any kind, are difficult to execute, even when both parties are willing to do the deal. Arndt Ellinghorst, head of global automotive research at London-based Evercore ISI in London and one of Europe's most influential auto analysts, handicaps the scenarios around a possible General Motors merger with Fiat Chrysler Automobiles.

The quotable Marchionne

EDITORIAL: FCA's pursuit, GM's protest are built into DNAs

IF NOT MERGERS, WHAT?

Sergio Marchionne is right. The problem is real. Automakers can't go on consuming capital the way they have.

They can't hope to meet the demands of consumers, regulators and investors without taking a hard look at how they spend their money.

On this much, the minds of the auto industry agree. But it's Marchionne's talk of mergers and takeovers -- even hostile ones -- that makes the industry cringe, and not without reason. Automotive history is rich with stories of deals gone sour, cultures clashing, "synergies" unrealized and employees embittered.

And besides, most automakers have concluded, there are better ways -- or at least other ways -- to conserve, consolidate and collaborate without the need to smash two companies into one.

Why won't GM play ball with Marchionne?

Sergio Marchionne's fixation with a General Motors merger says a lot about how he views the future prospects of FCA as a standalone entity. And GM's reticence to engage says a lot about how Mary Barra & Co. view their own.

THE FORD MODEL: Internal consolidation and streamlining

The Ford Motor Co. that Alan Mulally took charge of in 2006 was a dizzying jumble of eight brands and numerous regional fiefdoms. Mulally's simplistic-sounding plan to create “one Ford” transformed the automaker just in time for it to weather the looming recession without the multibillion-dollar bailouts needed at General Motors and Chrysler.

THE RENAULT-NISSAN MODEL: Tight alliance of separate companies

Instead of one company taking over the other, Renault and Nissan have helped each other through a global alliance for 16 years. Less than a merger, more than a partnership, the Renault-Nissan Alliance so far has proved a viable alternative to the all-or-nothing, one corporation approach to consolidation that has failed other automakers.

THE TOYOTA MODEL: Discrete joint ventures and projects

Toyota exploits a mixed bag of discrete ventures where they make the most sense, while largely avoiding deeper entanglements. The objective is to learn what it can from its rivals, and try to fill niches in its own lineup.

THE TESLA MODEL: Shared access to technology

By opening up patents and sharing a set of powertrains and electronics -- and encouraging other automakers to do the same -- Tesla can invest in what sets it apart: design, branding and user interface.

Reader reaction

EDITORIAL: In an uncertain future, carmakers have choices