MORE CONSOLIDATION IN AUTO INDUSTRY

John Elkann, Fiat Chrysler Automobiles chairman sees the need for more combinations in the auto industry and expects consolidations to continue.

“Hopefully this will be driven by reason and commonsense rather than by crisis”, Elkann said during his annual letter to the investment company’s shareholders. Sergio Marchionne as he is known to be the architect of the 2014 merger that combined Italian car producer Fiat and US counterpart Chrysler has been a vocal proponent of consolidation in auto industry.

High cost for developing cleaner vehicles and demand for self driving features have put pressure on traditional auto producers which also face new competition from the likes of tech companies such as Apple Inc and Google Inc.

“A new bout of combinations may be around the corner and FCA’s top management has clearly stated that the company is ready to take part in the consolidation”, Gabrielle Gambarova an analyst at Banca Akros wrote in a note to clients on Monday. “We understood that FCA is considering a full merger with another carmaker, and either Volkswagen AG or GM would make the most likely candidate."

Marchionne and Elkann said that Chrysler is strong enough on its own and it doesn’t need another deal, any future merger partner should be a global manufacture that is not too exposed to the European market while being culturally compatible with the Italian – American company.

According to Elkann industry mergers should take into account the importance of identity and culture, avoiding the two will have a negative impact on the business and this is what he doesn’t want.

 

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