5 Reasons Toyota Should Merge With Fiat Chrysler Automobiles
Tim Esterdahl | Jun 04, 2015 | Comments 13
For a few weeks now, Fiat Chrysler Automobiles CEO Sergio Marchionne has talked about finding another company to merge with. It isn’t just hot air either with news of an email being sent to General Motors. GM rebuffed the notion, yet that wasn’t the only email sent.
A recent report by Reuters.com says there were multiple emails sent to other perspective partners. While another merger seems like fiction, there are several companies that could profit greatly from working together with Fiat Chrysler Automobiles. Let’s play match maker and give you our top 5 reasons why Toyota joining with FCA makes a lot of sense.
Would a FCA and Toyota merger ever happen? Here are 5 reasons it should.
1. FCA Quality Reputation Gets Big Boost
Marchionne says one of the key reasons he is looking for a merger is to shore up FCA’s weaknesses before he steps down. One of those weaknesses, in our opinion, is FCA’s poor quality reputation. Even though, we think FCA and Ram trucks specifically have done a lot to address those concerns, it is really hard to shake a label like poor quality.
If FCA joined with Toyota, it would do a lot to remove the poor quality reputation seemingly overnight. This would certainly plug a weakness for FCA.
2. Toyota Sells Lots of Cars
Another key weakness for FCA is its continued inability to sell large volumes of passenger cars. Just last month, Chrysler celebrated a win when its 200 hit over 20,000 units sold, an increase of 537 percent. In comparison, Toyota sold 43,837 Camry models which was down 8.2 percent. The Camry destroyed the 200 in sales and this was a down month. Imagine if they worked together.
The idea of adding more volume is also exactly what Marchionne is reportedly looking for. He has been widely quoted as saying merging with another automaker is all about achieving more sales to increase profits.
3. An Electric/Hybrid Boost
Yet, another weak spot for FCA is on Electric/Hybrid vehicles. The facts are Toyota has lots of these vehicles with proven track records (Prius anyone?) while FCA has one in the U.S. (try to figure out which one it is. hint, it is not so easy).
By merging, FCA would immediately get out of the EPA’s doghouse and would see a significant boost to its CAFE fuel credits. This would also completely eliminate the need for FCA to spend millions/billions on future electric and hybrid powertrain development. Once again, Toyota will fill this gap quickly.
4. Interior Design, Infotainment Technology
You may be wondering what does Toyota get out of this deal. How about FCA’s interior and infotainment designers? Without a doubt, FCA has some of the sharpest interior designs and their Uconnect system is a notch above the rest of the industry. If you don’t believe us, take a look at a base Chrysler 200 vs. a base Toyota Camry. The interior in the 200 is substantially better.
5. Muscle Cars and EcoDiesel
Another big bonus for Toyota is a key foothold into the muscle car market and an EcoDiesel engine/powertrain ready to go for the Tundra. While the muscle car market would be a good side project for Toyota, getting access to the 8-speed transmission and the EcoDiesel would immediately give the Tundra a big boost in fuel economy.
Also, Ram has an entire heavy-duty lineup which Toyota could tap into. Once again, this would dramatically reduce the research and development costs associated with developing their own.
Finally, FCA has a massive amount of debt from its merger with Fiat and needs a company to help relieve this debt. Toyota just posted its third straight year of record profit. Its net profit grew 19 percent to a record $18.08 billion. FCA, on the other hand, just announced a $3 billion debt bond offering to help it refinance its existing debt. It also paid $2.7 billion in interest on its current debt load.
While the idea of Toyota and FCA merging is most likely not going to happen, it would be a really interesting development if it did.
What do you think? Who should FCA merge with?
Filed Under: TundraHeadquarters.com
that’s pretty interesting Tim, I gotta give it to you!!
would love to see a toyota truck with a ram level attention to detail and features.
your right, their interiors are sharp and SUPER functional.
not going to happen but kinda fun to talk about.
I always thought I would love to piece together a truck using parts, features, options from every manufacturer.
Mercedes tried that, didn’t work out so well. They lost a ton of money. I just don’t see the upside for Toyota, and please, do not put a Mopar transmision in my next Toyota. There is a rumor that Chrysler’s transmision development team is run by that guy from My Name is Earl.
huh?
they have arguably the best trans on the market
very arguably….
After having the tranny in my Durango rebuilt 3 times, I can argue from experience.
what year?
the ZF?
I should have qualified my original statement with I am not talking about the old crappy Chrysler slushboxes, only the new ZFs that they are using
Yes FCA is looking for a Cash Cow – savior.
I am saying my prayers and hope it is NOT Toyota. After all there is nothing in it for them, why tarnish the brand?
Maybe Ford would take the bait; but wait that would require Bail Out. Oh well that doesn’t matter, it looks like they both companies will need a bail out anyway.
If Ford merged with FCA they would get a bail out.
If Toyota merged with FCA they would not get a bail out.
The FCA question is a business “merger” issue – liquidity; the pickup truck part of it is tiny element.
My work vehicle for several years was a Dodge Durango. It went through two transmissions in 9 years.
My daily driver at home is still my 1985 Toyota pickup. Other than a clutch and brake pads, it’s pretty much original.
Tim,
I agree with your bullet points in your effort to get Toyota off the fence and invest in its lineup.
What’s intriguing to me is that Chrysler, which was hamstrung by a stalwart union and avoided bankruptcy with a shady, US government bailout, has turned themselves around and managed a profit. That eight speed and the diesel make an argument to unite as well as FCA’s well known infotainment system as you suggested.
However, Toyota must also be willing to be unionized by the UAW, a union that was instrumental in leading that company to financial destruction. After researching the current crisis of unions muscling in on union-free, profitable, free market companies, i’m not sure Toyota would benefit from a possible war with a company that is backed by the same infamous union whose members had to eat some of their working benefits and pension royalties.
Despite wrangling from all direction, what Marchionne has accomplished in bringing Chrysler back from the dead is remarkable. “A little leaven leavens the whole lump.” I’d stay away from FCA because of their union headaches alone.
FCA is selling 10% of its share of Ferrari as perhaps a way to generate capital. They seem to be aggressive in trying to find cash. Let’s see how this tuns out.
http://www.reuters.com/article.....7I20150605
Hi Rick,
Good point on the UAW. That would be a big sticking point.
For the record, and like I wrote, I don’t seriously see Toyota entertaining a merger offer. However, it is fun to think and write about.
Tim,
The unions suck. Still, good article bro!
Um no my girlfriend has a fiat that i drive to work and she drives my tundra cause she works closer to our hone…. NO fiats are crap i hate that car its a piece of S#!t.. runs like crap it falling apart before 40k miles so NO!
no thanks, toyota has everything to loose while Chrysler has all to gain, especially on the financial side of things.