FCA thrives alone, but tie-up OK, too

GENEVA — Many observers speculated that without Sergio Marchionne keeping it intact, Fiat Chrysler Automobiles would be quickly sold off.

But almost eight months after Marchionne’s unexpected death, CEO Mike Manley is running a standalone company that is investing in the U.S. and Europe, expanding the Jeep lineup and poised to add fresh talent to its executive team.

With the spinoff of the Magneti Marelli parts unit nearing completion and profits projected to grow in the second half of 2019, Manley said FCA will have a balance sheet with “strength we haven’t had before.” But Manley, in a meeting with reporters last week at the auto show here, refused to rule out any deal that could make the Italian-American company better — which is noteworthy when a French rival reportedly sees FCA as a possible partner.

“I want to find areas where cooperation — whether it is partnerships, whether it’s joint ventures or whether it is deeper levels of equity cooperation that makes sense for us and whoever that is — [will] give better vehicles to our customers and a better return to our shareholders,” Manley said. “I’m very open to it.”

In ways that might have pleased his predecessor, combinations and alliances are the topic du jour in the industry these days. Volkswagen says it’s looking for partners to share its electric-car platform, and Bloomberg News reported that PSA Group, planning its return to the U.S., may want to team up with FCA, GM or Jaguar Land Rover.

Marchionne had argued that the industry needs consolidation and partnerships to more efficiently fund research and development of hugely expensive electric- and autonomous- vehicle technology.

Asked about VW’s suggestion that other automakers join its massive EV project, Manley said it simply proved the point for him.

“If the biggest car company in the world is saying, ‘Please come and partner on a platform,’ I don’t think I need to endorse the point that scale is important,” he said.

Although FCA often is deemed a laggard in fuel economy, Manley noted that the average heavily electrified vehicle in Europe sold only 5,500 copies last year — the same rate as in 2014. When people ask if the company is late to bring electrification to market, his answer is “late for what?”

But he said the market is poised to change rapidly in the next couple of years, especially in Europe, where emissions rules are getting progressively stricter. To match the shift, Jeep promised two plug-in hybrids — the Renegade late this year and Compass early next year — at the Geneva show. The company also showed a PHEV concept for Alfa Romeo that looked production-ready and a pure EV reimagining of the Fiat 500 — also a concept.

Because battery-powered vehicles are still much more expensive to make than comparable gasoline-burning or diesel vehicles, collaboration may help lower costs faster.

“If there is the right partnership available that brings benefit, whether that is scale or reduction of capital investment,” Manley said, “then absolutely, I’d be very open to that.”

Even in an industry where rivals are always talking about possible partnerships, the news that PSA CEO Carlos Tavares sees FCA as an attractive target was notable — especially after Manley said FCA would look at “any deal that would make Fiat stronger” and Tavares said “we love to discuss with people who are looking for deals.”

A combination of FCA and PSA, “from a volume perspective, would make sense,” said Richard Hilgert, senior equity analyst at Morningstar Inc. Together, they would make almost 9 million vehicles a year, giving them the heft to compete with VW, Toyota Motor Corp. and the Renault-Nissan alliance in a way that neither can on its own, he said. This is particularly crucial in the small-car segments both are known for in Europe and South America.

And for PSA’s Peugeot, planning a return to North America in 2026, FCA’s U.S. retail network “would give them an opportunity to pitch to an established set of dealers,” Hilgert said.

In the meantime, Manley is working to conclude the spinoff of Magneti Marelli in the second quarter and looking to make a few more executive changes, such as finding someone to take over global leadership of the all-important Jeep brand, which he is still “technically” running himself.

“The team’s not set,” he said. “You will see some other changes as we get into this year. Obviously, we still have people carrying double hats — I think in some instances that’s appropriate, but in other instances it’s not. As much as I love Jeep, I think it’s important for us to get a strong global lead.”