FCA chief stalks GM

In an interview conducted with Automotive News (AN) in Detroit published Sunday, Fiat Chrysler Automobiles (FCA) CEO chief Sergio Marchionne claimed the logic of a merger between FCA and its much larger rival General Motors was "irrefutable".

GM has flatly rejected all of Marchionne's advances so far, but the Italian manager has refused to be deterred. He told AN that he has crunched the numbers on an FCA-GM merger, and they come out so good that his board of directors has no choice but to put the squeeze on GM.

"It would be unconscionable not to force a partner," he said. But he insisted he's not talking about a hostile takeover - which in any event might be difficult, since GM, the world's third-largest automaker behind Volkswagen and Toyota, is much larger than seventh-place FCA.

A stalker loose in corporate Detroit

"Not hostile," the FCA chief said. "There are varying degrees of hugs. I can hug you nicely, I can hug you tightly, I can hug you like a bear, I can really hug you. Everything starts with physical contact. Then it can degrade, but it starts with physical contact."

Marchionne sounds oddly like a stalker obsessing over a celebrity. Is it time for GM to ask a court to impose a restraining order on their hot-blooded suitor?

Perhaps not - GM doesn't seem to be taking him very seriously. Automotive News cited an unnamed high-ranking GM executive as asking: "Why should we bail out FCA?"

But Marchionne insists a merger would make sense for both companies. "We're not talking about marginal improvement in margins," he said. "We're talking about cataclysmic changes in performance, just huge."

The FCA chief said he had "gone through product by product, plant by plant, area by area, and I've analyzed them all," and he concluded that the potential profits from a merger would be exponentially larger than the current combined global earnings of GM and FCA.

A suitor scorned

The ardent Italian-Canadian corporate suitor has nonetheless encountered a wall of contemptuous rejection from his mighty crosstown rival. Marchionne told AN that GM wasn't taking his phone calls.

"I've offered to sit down with them and take them through the numbers," he said in frustration. "They won't listen… The capital markets won't understand why [GM] are rejecting the discussion."

According to Marchionne, the combined entity resulting from a GM-FCA merger could earn $30 billion a year in cash (26.8 billion euros), assuming a seasonally adjusted annual selling rate of 17 million vehicles.

The big payday?

AN cited Arndt Ellinghorst, head of global automotive research at Evercore ISA, as saying the earnings target was realistic.

"A combined GM-FCA will generate almost $25 billion in EBITDA this year," Ellinghorst told AN by email. "If you assume some synergies and peak US cycle market conditions, then yes, they could get to $30 billion in EBITDA."

EBITDA is a common corporate accounting term that means Earnings Before Interest, Taxes, Depreciation and Amortization. It's a measure of gross operating profit.

In any event, it appears Marchionne has no intention of reducing the intensity of his desperate appeals for a date with GM's top brass.

"You may reject the deal but you can't reject the discussion," he said. "If you're refusing to talk to me, and have seen nothing, you either think you're above it all, or you think the capital markets are full of schmucks that owe you something."

nz / uhe (Automotive News, AFPE)