Fiat Chrysler CEO: We'll talk alliances, but we can go it alone

August 4, 2019 4:57 PM

By Joseph White

DETROIT (Reuters) - Fiat Chrysler Automobiles (NYSE: FCAU) Chief Executive has a message for Renault SA and other would-be partners: We are happy to talk, but we can go it alone.

"Strategically, we have a solid future and clear plans that are being invested in and are underway now," Mike Manley said during a session with reporters the day after the company released better than expected second-quarter results.

"That isn't to say if there is a better future through an alliance or partnership or merger we wouldn’t be open and interested to it."

Fiat Chrysler is open to re-starting merger negotiations with French automaker Renault, Manley said, but added the French car maker is not the only potential partner to gain scale or plug gaps in Fiat Chrysler's technology or vehicle lineup.

"To say are they the only opportunity, the answer to that question would be a definitive ‘No,’" Manley said.

Fiat Chrysler in June withdrew a $35 billion merger proposal with Renault after French government officials intervened in the talks and sought to delay a decision on the deal.

The Wall Street Journal reported on Friday that Renault and Nissan are trying again to reshape their alliance and resolve disagreements that helped to derail the merger talks with Fiat Chrysler.

Fiat Chrysler has a commercial vehicle partnership with French rival Peugeot SA, and the two companies discussed a broader combination before Fiat Chrysler made its offer to Renault, people familiar with the situation have said.

Manley said automakers are not the only potential partners.

"There are cooperations that can help in specific technologies. There are cooperations as we think about the consumer-car interface," he said. "You could see collaborations that never would be there in the past."

Fiat Chrysler's North American business is strong thanks to Ram trucks and Jeep SUVs, but in other markets the automaker faces continued challenges.

The company is overhauling its mass-market business in Europe, which is anchored by the Fiat brand. Fiat Chrysler's Europe, Middle East and Africa operations were marginally profitable in the second quarter and achieved 1.8% profit margin in 2018. Manley has set a goal of 3% operating margins, well short of the 10% margins the company forecast for North America.

Fiat Chrysler can improve profitability in Europe by expanding the Jeep sport utility vehicle lineup, launching a redesigned Fiat 500 line, including electric and hybrid models, and adding larger vehicles to the Fiat brand, Manley said.

"We have the oldest fleet in Europe," in the Fiat brand, Manley said.

Increasing the number of cars produced per worker in Italy and reducing the ranks of Italian hourly workers, Manley said. But in the short term, Manley said he is prepared to sacrifice sales volume to increase margins.

"Margins in Europe are absolutely critical as we go through the next three to five years," he said.

A deal to pool emissions credits with Silicon Valley electric car maker Tesla Inc (NASDAQ: TSLA) gives Fiat Chrysler strategic options for managing rising emissions compliance costs, Manley said.

In China, Manley said the restructuring of Fiat Chrysler's alliance with joint venture partner GAC Group is reducing costs. The venture needs to add more Jeep models, he said. "We only have three vehicles localized," Manley said.

A third challenge for Fiat Chrysler is reviving the Maserati premium brand, which lost money through the first half of 2019, in part because of writedowns related to underperforming leases. The company has said it plans to sell down inventories of Maseratis during the remainder of this year.

An overhaul of Maserati's product line will begin with the debut of a new model at the 2020 Geneva auto show, Manley said.

(Reporting By Joe White; Editing by Michael Perry)

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