Fiat Chrysler CEO says long way from lobbying GM investors

June 25
7:46 AM 2015

Fiat Chrysler Automobiles (FCHA.MI) (FCAU.N) is a long way from making any offer to the shareholders of U.S. rival General Motors (GM.N) over a possible tie-up, FCA Chief Executive Sergio Marchionne said on Wednesday.

Marchionne has already approached his counterpart at GM, Mary Barra, with a merger proposal but was rebuffed. However, sources have told Reuters that Marchionne was lobbying GM investors to drag the GM board to the negotiating table.

"We are very far removed from any of those scenarios today," Marchionne told journalists on the sidelines of the much-awaited launch of the carmaker's first new Alfa Romeo model.

"None of my staff has spoken to them, I haven't spoken to them, nobody is under instruction to speak to them," he said.

Marchionne has repeatedly called for consolidation in the auto industry to share the prohibitive costs of building greener and more intelligent cars. Asked if he would consider an option of going hostile on GM, Marchionne said only that those players who kept wasting capital were acting in a hostile manner.

Earlier on Wednesday, FCA launched the Giulia midsize sedan, hoping to take on "boring" and "zero emotion" German rivals such as BMW (BMWG.DE) and Audi (VOWG_p.DE) in the fast-growing and high-margin market for premium cars.

"This car can beat the Germans any day," Marchionne said.

Developed by a team led by engineers drafted from stable-mate Ferrari, the new Alfa Romeo will sit on a new rear-wheel platform, dubbed Giorgio, have around 500 horsepower and boast Ferrari-derived six-cylinder engines. It is meant to be a direct rival to BMW's 3 series and could go on sale in Europe at the end of this year and in the United States in early 2016.

Marchionne is betting on the sporty Alfa brand because he believes it can deliver the global profile that the mass-market Fiat brand cannot and far greater sales volumes than top-end Maseratis. The strategy has so far been met with scepticism.

He plans to race sales of the 105-year-old brand to 400,000 by 2018 by spending 5 billion euros ($5.6 billion) to launch eight new models, starting with the Giulia and followed by the launch of the next model within six months.

The target is ambitious given that fewer than 68,000 Alfa Romeos were delivered last year. Forecaster IHS Automotive expects total Alfa sales to reach about 216,000 cars by 2018.

"While it has history, turning it into a credible premium player will be like launching a new company ... it took Audi 20 years or more," Bernstein analyst Max Warburton said. The revamp "is going to swallow a significant sum of capital and has no chance of earning any money in its first product cycle."

FCA faces an uphill battle to convince drivers that Alfa has shed a reputation for poor quality and service, and to persuade investors it has the formula and money to make the relaunch work this time around. The carmaker is loaded with debt, its margins are under pressure in its North American profit centre and it is also battling a steep downturn in Brazil.

Marchionne, however, says the merger between Fiat and Chrysler gave the company the financial and technical muscle to succeed in "one of the most important" projects of his career.

The new Alfa Romeos are also expected to help boost jobs and fill under-utilised plants in Italy. Italian Prime Minister Matteo Renzi tweeted after the event: "How beautiful the new Giulia! Welcome back Alfa Romeo #proud #Italyrecovers"

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