In a letter to shareholders of Exor SpA, an investment company which controls Fiat Chrysler, Fiat Chrysler Automobiles NV Chairman John Elkann is lobbying once again for the company to merge with one of the industry “Big Guys.” Elkann estimates that a merger would save the combined company upwards of $10 billion annually by reducing development costs.
Elkann’s letter supports the investment and restructuring mandate of Fiat Chrysler CEO Sergio Marchionne, who formed FCA by combining Italian manufacturer Fiat with Chrysler. Overtures by Marchionne to combine FCA with General Motors were rebuffed by GM CEO and Chairman Mary Barra in September.
Claiming the need to have “two to tango”, Elkann suggests that FCA competitors are ignoring the importance of traditional revenue from new car sales as they become preoccupied with engineering efforts that they hope will be technologically disruptive.
Referring to a report from industry consultants McKinsey & Co. that projects that sales of new cars will increase from $2.75 trillion in 2015 to $4 trillion in 2030, Elkann says that “carmakers need to figure out how to make this profitable and guard against falling into the 1990 trap of ignoring that business while chasing profits.”