It seems that Fiat Chrysler Automobiles (FCA) is serious in its intention to merge with General Motors (GM).
Over the weekend, FCA's CEO Sergio Marchionne reportedly said that a merger with GM is a "high priority," and that the move would "be the best possible strategic alternative for [FCA] and [GM]."
To back up the company's interest in the possibility of a merger with GM, it seems that Marchionne had done research, saying the deal would lead to big synergies as well as savings.
Based on an interview with the CEO, the combined entity could produce $30 billion annually in revenue before taxes. This number, according to sources, was recently confirmed by Evercore ISI, an American independent investment banking advisory firm.
The amount is seen as a massive increase from the $13 billion (GM) and $9.5 billion (FCA) revenue that the two companies currently generate separately.
In achieving the $30 billion revenue mark, a report points out, it would require major synergies on these components: vehicle delivery, manufacturing, marketing, sales, and more. The report also says it would be likely for Fiat and its brands to be controlled like a new division under the GM family. This, however, could result in major cost cutting at Fiat, according to sources.
Earlier this year, it was reported that the board of GM had already rejected the merger proposal from FCA. The former said it is already content with its business plan as well as its size.
Moreover, experts in Europe say FCA's merger plan does not make sense. They believe it is not going to happen. In fact, other experts consider the move more of an insurance policy for FCA rather than a deal that would benefit GM.
"Certainly, FCA needs another partner, but it can't force GM to come and play," said David Bailey, professor at the Aston Business School.
Meanwhile, Garel Rhys, director for Automotive Industry Research at the Cardiff Business School, believes FCA does not need a partner.
"Most economies of scale are exhausted once you get to 4-1/2 million a year, and I also don't see any logic for this deal from GM's point of view. Clearly, FCA would like it," Rhys said. "Frankly, I can't really see the logic that would drive GM to get in bed with FCA. There are really fundamental reasons why GM shouldn't touch this with a barge pole."
