Tag Archives: Sergio Marchionne

How Frank Stronach outwitted Sergio Marchionne and got Opel

My apologies to all of the Case New Holland readers of this blog.  David Olive posts a story about your boss, Sergio Marchionne getting outsmarted which I have posted below.

The Opel Logo ….so Berlin ultimately favoured the bid by a consortium led by Magna. OpelVauxhall becomes the first Canadian-controlled automaker since 1918. when the Oshawa, Ont.-based McLaughlin family sold its business to General Motors. And the Fiat plan to leap from regional player to the world #2 automaker is in ruins.

German Chancellor Angela Merkel‘s governing coalition partner, which her party will face in September at the polls, was poised to use a Fiat deal – with resulting losses of German Opel jobs – to paint her as insensitive to the fate of the 50,000 Opel-Vauxhall employees at a time of severe recession in the world’s third-largest economy. The chancellor is smarter than that, of course, and made it weeks ago that (a) she would be much more tight-fisted than the Americans in doling out corporate bailout funds to a successful Opel bidder, and (b) the bidder winning Berlin’s approval would be the one pledging to preserve the greatest number of Opel’s German plants and employees.

Thus the Stronach-led bidding consortium vows to preserve all four Opel plants in Germany, and put a substantial sum of its own money into Opel. Magna is one of the few healthy firms in the global auto industry, with a $1.5-billion cash hoard. Fiat, by contrast, is pretty close to flat broke. With both Chrysler and Opel, Fiat was offering not a penny by way of a purchase price or subsequent cash injection to bolster these troubled automakers, but simply offered its managerial expertise in attempting a turnaround of the firms. That worked with Chrysler, whose management talked with two dozen or so automakers worldwide and could not find even one willing to assume management of the Detroit-based firm or invest a nickel in the legacy of Walter Chrysler, as the former president of Chrysler testified last week at the Chrysler bankruptcy court hearings.

As a Canadian I think it is cool that fellow Canuck now owns a car maker but who really cares about Opel?  Apparently more people than currently care about Chrysler.

So Stronach becomes the first auto-parts maker in history to become a full-fledged automaker, using Opel’s superior technology and production methods to help partner, GAZ, the large Russian automaker,  sell more vehicles in the enormous Russian market. And at a time when Magna’s reliance on a shaky GM and Chrysler – long a grievance for Magna critics – threatens Stronach with declines in parts volume, he now has Opel and Vauxhall to make up at least some of the difference.

That is provided, of course, that Magna is up to the task of reviving the two brands. We have our doubts. Magna has been assembling complete vehicles for years, at its Magna-Steyr plant in Austria, but in limited numbers and on contract to established automakers. Without the backing of a major automaker of former parent GM or Fiat, it will lack shared technologies for new-product development and leading-edge manufacturing methods. It has no experience dealing directly with motorists or with showroom dealers. It also can be argued persuasively that in a global industry with two many cars chasing too few customers, Opel and Vauxhall needed to perish or be absorbed by an existing automaker rather than achieve independence from GM only to add to an industry with two many self-standing players.

For Fiat, this is a huge setback. Opel is a much stronger brand than Chrysler. Opel is better established in its fast-growth markets of Germany and Eastern Europe (when they recover from the recession), boasts far more technology and design prowess (which were stripped from Chrysler by previous owner Daimler AG), and has a demonstrated ability to make money in good times.

Opel’s current woes have mostly to do with the sharp economic downturn in Germany, Eastern Europe and Russia. By contrast, Chrysler was a chronic money loser even in economically robust times in its U.S. market during the nine years of the DaimlerChrysler experiment. For Fiat, Opel was the real prize, and Chrysler merely a dealer-network pipeline for a second bid to win U.S. consumers to a Fiat brand that Americans have rejected in the past.

“Fiat needs this deal,” Max Warburton, an analyst in London with Sanford C. Bernstein, told the New York Times. “Marchionne himself has said Fiat lacks the scale to thrive in the long term.” Opel’s technology is especially valuable, Mr. Warburton said, as Fiat develops the next generation of small-to-midsize cars.

What it means is that maybe I won’t get that Pontiac G6 that I have been looking at and wait until I can get the Brian Mulroney Limited Edition Opel Sedan (you have to pay for it in cash in a hotel room).  I can imagine Labatt’s Hockey Night in Canada could be replaced by Opel Hockey Night in Canada and GM Place in Vancouver is soon to be called Vauxhall Place.  One thing that I do hope is that Frank Stronach brings the iconic Montreal Expo mascot, Youppi back and hires him as Opel’s spokesman.  He has already moved from the Expos to the Habs and became a favorite of mine after he did a skit about Slim Fast on the top of the L.A. Dodger’s dug out that so enraged Tommy LaSorda that LaSorda had Youppi tossed from the game. (Wikipedia has a different recollection of the incident but I watched the game and I am pretty sure that it started with a Slim Fast skit)  Can you imagine the fun he would have with GM?

Speaking about GM, David Olive has a good article about how GM can reinvent itself.

A humbled GM can change its ways, as a then-arrogant Fiat SpA did in pulling itself back from the brink only five years ago. (Fiat is now Chrysler’s planned saviour.) And if a global credit crunch leaves government as the sole source of bailout financing, so be it.

As part of its restructuring, GM will close 14 plants, part ways with about one-quarter of its dealers (something it should have done years ago), and lay off yet another 21,000 employees. Yet, post-bankruptcy, a leaner and much healthier GM will continue to put bread on the table for tens of thousands of employees, about 4,000 suppliers, and several thousand dealership employees that often are the business mainstay in small-town North America.

GM remains the U.S.’s biggest manufacturer, still a powerhouse of engineering and technological breakthroughs, most visibly with its all-electric Chevrolet Volt. GM is America’s biggest purchaser of information technology. Entire states in the industrial Midwest and Canadian cities such as Oshawa, Oakville, Windsor and St. Catharines rely on GM and its employees for an outsized portion of their property and income-tax revenue.

All of which is moot, if GM is ultimately destined, as many believe, for the scrapyard in the sky. Somehow, I don’t think so.

GM will emerge from bankruptcy with only one-quarter or so of the debt it held earlier this year. It finally will be liberated from the burden of active and retiree health-care costs that have added an average $1,500 or so to the cost of each vehicle GM produces. (The health-care burden has been shifted to union-administered trusts financed in a one-shot deal by GM and with a top-up from government.)

GM’s hourly wage costs, after enormous concessions by the Canadian Auto Workers and the United Auto Workers, are now in line with wage rates at "transplants" – the U.S. and Canadian factories operated by foreign-based automakers. The UAW has given up its right to strike until 2015.

After the waves of GM layoffs of recent years, and further reduction in capacity during the restructuring, GM will have cut its fixed costs to levels enabling it to compete on price with foreign-based rivals.

CEO Fritz Henderson told reporters last week that GM will be able to turn a profit even in the current dreadful market – with North American sales at a 27-year low of just 10 million vehicles and a GM market share of only 18.5 per cent, a slight reduction from the current 19.1 per cent.

"We will come out of this rid of some of the historic legacy costs that have been dragging us down for the last 20 years or so," Bob Lutz, GM vice-chairman, said in a Thursday speech. "We will come out of it with an all-new focus on product development."

In an off-the-record briefing of reporters that same day, an Obama administration official said: "GM should be highly, highly profitable given the new cost structure that is being put in place, given the vast reduction of liability that has been achieved."

The Fiat Takeover of Chrysler

From David Olive over at the Great Recession blog has this great post on the Fiat takeover of Chrysler

fiat_logo_26_10_06 Just so we’re clear on the Fiat rescue of Chrysler that the White House is counting on:

Hell, if Washington is giving away a 20 per cent stake in Chrysler, give it to me. If Fiat won’t be taking on any of Chrysler’s debt and retiree obligations, and Washington is giving away Chrysler’s massive minivan plant in Windsor, one of the biggest – if not the biggest – vehicle assembly plant in the world, I’ll take it. The Jeep brand, free for the asking if your name is Sergio Marchionne? I’ve have some business experience – met a budget at a magazine I ran for a few years, operated a successful yard-maintenance business in my teens, bought a French-made Mercier racing bike with my paper-route earnings…(Fiat probably wants to buy Mercier, too.)

Man, somebody’s being played for a sucker here.