When It Came to Deals, Fiat Engine Stalled 3 Times
If you want to see firsthand the difficulties of trying to pull off a merger between two car giants, look no further than Fiat.
The Italian auto company made three abortive efforts in three decades to link up with other companies--with France’s Citroen in the 1960s, with Ford Motor Co. in the 1980s and then with Chrysler Corp. in the early 1990s.
“Mergers between car companies are very difficult to carry out. These companies tend to have very strong corporate cultures, and they guard their technical know-how jealously,” said Mario Deaglio, an economics professor at Italy’s University of Turin, the city where Fiat has its headquarters.
“Every 10 years I see a beautiful study that says that the major European car companies must merge, and then it never seems to come about.”
The industry has seen several significant takeovers in recent years, such as Ford’s purchase of luxury car maker Jaguar and BMW’s acquisition of Rover. But none has involved a merger between two giant companies in good financial health.
Few of the European car companies have tried harder than Fiat to make a grand industrial alliance happen.
The attempt to tie up with Citroen in the late 1960s was vetoed by French President Charles de Gaulle on the grounds that a vital national company could not cede control to foreigners.
Fiat had protracted talks with Ford in the mid-1980s on pooling the two companies’ European car-making operations. The negotiations eventually foundered when Fiat’s top managers realized Ford was determined to run the joint venture.
Fiat came even closer to striking a deal in 1990-91, when it had six months of negotiations with Chrysler.
Sources close to Fiat said outgoing Chairman Cesare Romiti, who helped scuttle the deal with Ford, had been eager to forge an alliance with Chrysler.
The talks were abandoned when Fiat’s advisors expressed doubts over the ability of Chrysler, which was in financial difficulty at the time, to make a full recovery.
Investors have speculated that the prospect of a linkup between Daimler-Benz and Chrysler would put pressure on Fiat to find itself a partner at a time of renewed talk of overcapacity in the European car industry.
“This development puts a lot of pressure on Fiat’s management,” said an auto industry analyst in Milan who asked not to be named. “They know that the next cyclical downturn could be really tough.”
The analyst said a tie-up between Chrysler and Daimler-Benz need not rule out renewed talks between the U.S. auto maker and Fiat.
“Daimler-Benz is a high-end car maker. Chrysler may also want an alliance with a low-end, volume manufacturer like Fiat.”
Industry watchers have speculated that Paolo Fresco, the No. 2 executive at General Electric Co. who takes over as Fiat chairman later in the year, may have a chance to pull off what has eluded his predecessors: a successful marriage with another big car company.
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
In Overdrive
News that Daimler-Benz is in talks to buy Chrysler powered some foreign auto stocks higher Wednesday as investors speculated that further deals could be in the offing. The stocks of the two other big U.S. car companies slipped, however, because neither is considered likely to be bought out:
*--*
Company Ticker Wed. Close Wed. change % change Chrysler C $48.81 +$7.38 +17.8% Volvo VOLVY 32.44 +2.25 +7.5 Fiat FIA 22.38 +1.38 +6.6 Daimler-Benz DAI 108.56 +6.50 +6.4 Renault RNO* 51.78 +3.13 +6.4 PSA Peugeot Citroen PEUGY 46.63 +2.00 +4.5 Ford F 45.75 -0.13 -0.3 General Motors GM 67.94 -0.50 -0.7 Honda HMC 71.44 -1.00 -1.4
*--*
Chrysler at a Glance
The No. 3 U.S. auto maker has been the industry’s pioneer in selling minivans and sport-utility vehicles. It has been selling off non-automotive holdings in recent years.
1997 sales: $58.6 billion
1997 earnings: $2.8 billion
Employees: 121,000
Headquarters: Auburn Hills, Mich.
Manufacturing locations: Primarily in the United States; also in Belgium, Singapore and South Africa
Source: Associated Press
Daimler-Benz at a Glance
The German company is best-known for its Mercedes-Benz cars and trucks. It also makes rail systems, aircraft propulsion systems and automotive electronics, and provides financial, telecommunications and information systems services.
1997 sales: $68.97 billion
1997 earnings: $4.47 billion
Employees: 300,068
Headquarters: Stuttgart, Germany
Manufacturing locations: Around the world, including the United States.
Source: Associated Press
