Comment on Financial Times Lex report: Fiat Chrysler: small, unbeautiful Wall

FT has an excellent report about the rumors of GWM buying FCA or at least one brand (Jeep) from FCA:

The Great Wall is smaller than many imagine. The same goes for the Chinese car company of the same name. The structure is not visible from space, after all, and the Great Wall Motor Company is not big enough to buy Fiat Chrysler — on its own. If Fiat boss Sergio Marchionne and family shareholders want to unlock value, they need another way to do it.

Pity. The idea that Great Wall might buy the Italian-American automotive group had the superficial credibility that comic Stephen Colbert would call “truthiness”. Great Wall said it favoured the acquisition. The scale of the Chinese market was presumed to supply the firepower. A subsequent dousing with cold water was provided by equity capitalisation figures of HK$122bn (US$15.6bn) for Great Wall and €16.5bn for Fiat. (…)

Traditional automakers have been building up cash in case car sales nose dive. A bidder would not only have to buy out Fiat’s equity. It would need to assume net debts, estimated at €3.4bn by Citi, and a pensions deficit of about €5bn.

As one of the frequent commenters on FT, I shared the following, in line with the conclusion of the original article:

Lucian Vinatoriu 7 minutes ago: FCA is the 7th largest automaker with global sales in the vicinity of 4.4 million as of 2016. GWM sold 1 million. Yet, the young Chinese company would love to have an entry ticket on the American market, while Marchionne is aiming to have a glorious exit before retiring in 2019. However, he preferred until the last moment to have a grande cup of latte with Mrs. Barra rather than a cup of lotus tea with whoever is running GWM. It’s no secret that Marchionne is a fan of unified platforms among different brands and I think I know where from he got the inspiration. Mind it though, Marchionne is not Ghosn because the Fiat story could never be Renault/Nissan/Samsung/Dacia/Mitsubishi story. Likewise, forget the similarities with the Volvo/Geely story. FCA is a dinosaur empire generating good profits. And yet there is hardly one jewel left on the crown – the Jeep. And that won’t come cheap.