Former Obama Adviser Says FCA-GM Merger A Bad Idea

He’s been an adviser on the Obama auto task force as well as a major investor in GM. Harry Wilson is clearly an automotive industry insider with a lot of knowledge that has been put to use in the private and public sector. So when he says an FCA-GM deal is a bad idea, people listen.

That’s why when he appeared on CNBC on July 7 and was asked about whether or not GM should team up with FCA, his response made headlines. In a CNBC interview, Wilson said, “I have no disrespect for Sergio Marchionne (CEO of FCA). He’s a really smart guy. It’s true that there’s a lot of misspent capital in the auto industry, but that is only part of the equation. The complexities of an auto merger are massive; historically, they have not had very good results.”

Wilson’s comments come after Sergio Marchionne sent an email to GM indicating interest in collaboration with FCA. General Motors CEO Mary Barra has indicated she and top GM management “studied” the email and decided not to pursue any talk of a merger or partnership with FCA. What’s left is Marchoinne wanting to make a large deal with GM and GM having no interest in that pursuit. However, Marchionne isn’t alone in this goal.

John Elkmann, the chairman of FCA told the Wall Street Journal FCA in fact hasn’t given up on a partnership with GM. In an interview Elkmann said, “GM hasn’t been put to rest. GM is not the only option, but no doubt from a feasibility and quantum point of view it is by far the best.”

The question of why FCA is seeking a merger is answered by looking at their large pile of debt and reported issues in both Brazil and China. In the same WSJ report, Morningstar Inc. analyst Richard Hilgert spoke about how far FCA has come and how far they still have to go. Hilgert told the WSJ, “They have a lot more scale than what they used to have but what they used to have was abysmal, and what they have now is just bad.”

FCA does not seem to want to give up on GM. They want a merger or large collaborative deal and GM has stated publically such a deal doesn’t interest them. Do you think that their persistence will pay off or underline their lack of a deal? Do you think FCA will find a way to fix some of their problems and rise in the automaker ranks?