As Fiat CEO Sergio Marchionne scurries from continent to continent, trying to knit together his ambitious plan to take over bankrupt Chrysler, merge with GM’s European operations and keep once-ailing Fiat motoring ahead, there’s one thing that is a near certainty. It won’t work.
The Financial Times tried to be diplomatic about this reality:
History is not on his side. Cross-border mergers of carmakers have a track record of losing money and ruining managers’ reputations, while European acquisitions of US car companies have done even more poorly.
Any one of the challenges Marchionne wants to take on would be a huge management stretch. He has proved he is enormously capable — few would have given him much chance in rescuing Fiat alone. But the added complexity and distraction of two acquisitions puts his plan into true management nightmare territory. It doesn’t matter that he would acquire Chrysler, Opel and Vauxhall for next to nothing. The smallest problems are the money problems.
As numerous studies have documented, most m&a activity destroys value. If you’ve ever been involved in a merger or acquisition, I’m sure you’ve seen what can go wrong. Cultures don’t mesh. Leadership is over-extended. Assumptions you made in one organization don’t apply at all in the other. If you do it across borders, the odds become even poorer for success. And if you do it in something as politically charged as the auto industry, forget about it.
So Marchionne should hope that the increasing number of obstacles that seem to be emerging in Germany to stymie his deal proves decisive. He’ll have more than enough to do with Chrysler — an auto industry basket case if there ever was one — alone. If somehow he does manage his ambitious triple play and create the world’s third largest automaker, and then succeeds with it, they’ll need to invent a new category of the Nobel prizes to honor him appropriately. But don’t bet on it.