FCA is in talks with other carmakers to share the development costs of new vehicles

Article by Christian A., on January 16, 2015

Fiat Chrysler Automobiles is holding discussions with other carmakers to share the development costs of new vehicles and technology, particularly to reduce greenhouse gas emissions, FCA chief executive Sergio Marchionne said at the Detroit Auto Show. Marchionne noted that the development costs being incurred by carmakers are well in excess of what he considers “a mature industry to be able to afford."

While deflected questions on whether FCA was holding merger talks, he remarked that the carmakers' relatively low stock values mirror’s investor views that automakers are wasting capital building their own versions of commoditized technologies like the hardware for four-cylinder engines.

There have been media reports suggesting that FCA was in talks with PSA/Peugeot-Citroen and Volkswagen over possible partnerships. FCA’s disclosure last year of a plan to spin off Ferrari led to speculations that Italian carmaker would seek another merger partner, possibly to allow it to better compete in Asia.

According to Marchionne, Ferrari will stay put with its policy of keeping output below market demand, dismissing rumors that the supercar unit might substantially hike sales following the spin-off. Marchionne also called on the United States government to ease fuel economy targets for 2025.

By that year, the US will require carmakers to have fleet average fuel economy of 54.5 miles per gallon of gasoline. Marchionne noted that customer now have less reason to pay more for advanced fuel-saving technology as gasoline prices dropping to $2 a gallon or less.

With the US Environmental Protection Agency set review the fuel economy targets by 2018, Marchionne is expecting other carmakers to lobby the EPA to extend the timetable for achieving the 54.5 mpg goal as well the corresponding target for carbon dioxide emissions.

FCA, now the seventh-largest carmaker in the world, made its debut on Wall Street in October 2014, although investors were a bit cautious of the merger between the Fiat Group and the Chrysler Group. FCA’s shares opened on the trading floor at $9.00 in New York, and closed the day at $8.92. Only around 5.8 million shares were traded on FCA’s NYSE debut. Nonetheless, FCA still keeps a secondary listing in Milan.

Marchionne credited with reviving both Fiat and Chrysler, pursuing a merger that now has resulted to the creation of carmaker large enough to challenge Toyota, General Motors and Volkswagen. FCA looked forward to its US listing as it seeks to generate enough equity and gain access to large amount of funds required to truly transform the company into real global players.

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