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FCA Boss Sergio Ready To Force GM to Partner


Gorehamj

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John Goreham

Contributing Writer, GM-Trucks.com

8/31/2015

The GM-FCA merger talk we though had died down has picked up again. In our story of June 18th we explained that Sergio Marchionne had asked General Motors to discuss merging. GM was reportedly "abrupt" with their reply declining the invitation. Now Marchionne says that GM won't answer his calls. Normally, that might be the end of the issue, but Marchionne thinks that he has the ability to pressure GM by working with GM investors. A hostile takeover is one way to say it, but Marchionne doesn't seem to want that. What he wants is to have a discussion.

 

In a very detailed two-hour interview with Automotive News (AN) Marchionne says "I've offered to sit down with them and take them through the numbers. They won't listen. And that kind of abject refusal to engage ... the capital markets won't understand why you are rejecting the discussion."

 

In a follow up to our original story we reported why GM thinks it might be able to hold off FCA US' advances. Basically it comes down to the incredibly unusual bankruptcy deal GM was given in 2009. The old company was able to shed all its old debts, and protect itself from liability going forward by forming a "new GM." That is not that unusual. However, the new GM got to carry forward the losses of the old GM for federal taxes on profits. That is completely unique. That means that GM has the ability to generate many billions in un-taxable profits. A merger would presumably wipe out that protection. However, take a look at the image above. Remember the sweetheart deal the automakers got in 2009? Perhaps keeping the protection from taxation is also up for discussion?

 

Marchionne says he thinks that in a combined GM and FCA there are billions in savings. He says that he sees $30 billion in before tax profit in year one. Given that, it is easy to understand why he told AN "It would be unconscionable not to force a partner."

 

 

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I'm sorry but this should just stop. Now. The both of them have a lot to fix as it stands, and it seems that Sergio wants to rid himself of FCA and their problems and take GM's problems, snowball them and walk away from it.

 

GM does not need to merge with anyone. FCA should mind their own business and be a formidable competitor.

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I see no benefit for GM to merge with them of all people...they would only pull GM down. In short FCA should just buzz off.

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Less consumer choice, less competition, less reason to innovate, less jobs. Sounds like something the government should wholeheartedly endorse, facilitate or mandate if necessary.

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