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FCA Pulls an Emily Litella. 'Never Mind!'

Bill Koenig
By Bill Koenig Senior Editor, SME Media

So much for the urge to merge. Fiat Chrysler Automobiles on Wednesday night pulled an Emily Litella. “Never mind!”

Fiat Chrysler said in a statement it was withdrawing its 50/50 merger proposal with France’s Renault. It was a swift turnaround. FCA made the proposal only last week.

“FCA remains firmly convinced of the compelling, transformational rationale of a proposal that has been widely appreciated since it was submitted,” the company said. “However it has become clear that the political conditions in France do not currently exist for such a combination to proceed successfully.”

For the uninitiated, Emily Litella was a character from the earliest years of Saturday Night Live. Poor Emily frequently was confused. When told she had heard something incorrectly, she said, “Never mind!”

FCA viewed a tie-up with Renault as the route to becoming a dominant player in the worldwide auto industry. In addition a direct merger, Renault also has an alliance with Nissan Motor Co. and Mitsubishi Motors Corp.

Fiat Chrysler includes the former Chrysler Corp., traditionally the runt of the Detroit Three automakers. But a combined FCA-Renault would have made it a bigger player than Chrysler’s traditional Detroit rivals, General Motors Co. and Ford Motor Co.

The thing is, the French government owns a chunk of Renault. With a normal merger, jobs usually get cut. With an uncertain economy, the government wouldn’t want to chance that.

So, once more, dreams of a big merger at Fiat Chrysler have been put on hold. Former CEO Sergio Marchionne long sought a big deal but was rebuffed by the likes of GM and Volkswagen AG.

Marchionne died last year and it seemed his dream would go unfulfilled. Then, on May 27, Marchionne’s successors announced they had approached Renault.

The dream lived. For nine days, anyway.

Tricky Mergers

Mergers, though, are tricky. Chrysler went through one with Daimler AG, starting in 1998. It never produced the promised gains. It was billed as a “merger of equals.” In reality, the German automaker, maker of luxury Mercedes-Benz vehicles, never understood Chrysler nor really cared to learn. In Germany, Chrysler was viewed as a drag on a great company.

Daimler dumped Chrysler in 2007 with private equity firm Cerebus Capital Management taking over. Cerebrus ran Chrysler into the ground. Italy’s Fiat took Chrysler over as part of a U.S.-backed bailout in 2009.

“Despite the on-paper advantages, these mergers can be nightmarish – disruptive, unproductive and, in some cases, unsuccessful – and no one knows that better than FCA,” Michelle Krebs, executive analyst at Autotrader, said by e-mail last week.

“Look at Honda, Subaru, BMW,” she added. “They have successfully gone it alone even though so-called experts said there had to be consolidation and mergers were required.”

For now, Fiat Chrysler will go back to what to what it has been doing, including bulking up its Jeep and Ram brands.

Bigger dreams? Never mind.

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