File picture: AP Photo / Carlos Osorio.
File picture: AP Photo / Carlos Osorio.

GWM confirms interest in Fiat Chrysler deal

By Brenda Goh and Norihiko Shirouzu Time of article published Aug 22, 2017

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Shanghai - Great Wall Motor is interested in Fiat Chrysler Automobiles (FCA), an official from the Chinese company said, confirming reports it is pursuing all or part of the Italian-American carmaker.

Speculation about Chinese interest in FCA has emerged since Automotive News reported last week that an unidentified "well-known Chinese automaker" made an offer earlier this month.

FCA shares rose more than 5 percent in Milan on Monday to their highest in 19 years. But industry experts said any Chinese bid was likely to encounter financial, political and regulatory obstacles in the United States, China and Europe.

"With respect to this case, we currently have an intention to acquire. We are interested in (FCA)," an official at Great Wall Motor's press relations department told Reuters. He declined to give his name and gave no further details.

Two people familiar with the matter said GWM had asked for a meeting with FCA to make an offer for all or part of the group.

FCA seeking a partner

FCA said in a statement it had not been approached by GWM, and was busy implementing its current business plan. Its main investor, Italy's Agnelli family, declined to comment.

FCA Chief Executive Sergio Marchionne is seeking a partner or buyer for the world's seventh-largest carmaker to help it to manage rising costs, comply with emissions regulations and develop technology for electric and self-driving cars.

GWM, China’s largest SUV and pick-up manufacturer, would be making an audacious move in taking on FCA, which has a market value of almost $20 billion (R264bn).

If Great Wall, with a market value of about $16 billion (R211bn), bought FCA it would be China's largest overseas automotive industry deal to date - dwarfing Geely's 2010 billion acquisition of Volvo cars.

Chasing the Jeep brand

Automotive News, citing an email from GWM President Wang Fengying, said the Chinese group had contacted FCA specifically over the Jeep brand. It then cited a spokesman confirming this interest, but saying the Chinese carmaker had not made a formal offer or met with FCA's board.

"Our strategic goal is to become the world's largest SUV maker," Automotive News quoted the spokesman as saying.

"Acquiring Jeep, a global SUV brand, would enable us to achieve our goal sooner and better (than on our own)."

Any Chinese offer for FCA would be a bold move, analysts said, given the carmaker's heavy presence in the United States and Europe, two regions that have suffered from Chinese investment restrictions in the motor industry for decades.

"There will almost certainly be massive political backlash due to the lack of reciprocity in market access," Thilo Hanemann, economist at Rhodium Group, said.

Key brands in focus

Marchionne told analysts last month that a new five-year strategy - to be unveiled next year - could include asset sales.

While acknowledging Jeep, Ram, Maserati and Alfa Romeo could exist on their own, he appeared to pour cold water on them being sold since it would leave a less profitable "stump" behind.

Jeep SUVs and Ram trucks, the two most coveted of FCA's brands, have become a major profit engine for the carmaker's North American operations.

"Jeep is the most logical choice (for Great Wall)," said Yale Zhang, head of Shanghai-based consultancy Automotive Foresight. Ram could be an option, but "the Jeep brand is recognised globally."

Any breakup would leave FCA with marques such as Fiat, Dodge, Chrysler and Alfa Romeo, and could result in heavy job losses at plants in Italy that have battled with weak demand and high labour costs.

"The idea of a breakup is unacceptable," Michele De Palma, head of the auto sector workers at the FIOM union, said.

If Marchionne opens the door to selling Jeep as a standalone business, other carmakers like Volkswagen, General Motors or Ford might show interest, analysts said.

Jeep targets sales of 2 million vehicles in 2018, up from 1.4 million in 2016. Marchionne has said deliveries from the SUV brand could eventually rise to as many as 7 million a year as demand for SUVs is set to keep rising.

Marchionne might also use Great Wall’s interest to try to attract other bidders, sources familiar with FCA said.

He has long advocated more car industry mergers, but his preferred target GM has firmly rebuffed his approaches.

If successful, a deal would boost Great Wall's market position and allow it to get around the politically charged issue of manufacturing in the United States to sell there, something that would otherwise take decades to build up.

Great Wall's founder and chairman Wei Jianjun saw opportunity when China began to fall in love with SUVs, and invested heavily in its Haval brand, cutting back on sedans. Within a few years, it was a top seller.

The people familiar with the matter told Reuters that Great Wall had been making plans for the US market for some time, mainly by upgrading some key products and improving branding.

The company earlier this year launched a new premium brand of potentially US-market ready vehicles, which it refers to as Wey in English. Wei is the last name of Great Wall Motor founder and chairman Wei Jianjun.


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