Skip navigation
Newswire

UPDATE 2-Fiat Chrysler merger email to GM not the only one sent to rivals - chairman

* Exor open to diluting FCA stake in case of good deal

* FCA approached more than one car company to seek deal

* FCA has "good prospects" says chairman Elkann (Adds detail and background)

By Agnieszka Flak and Gianni Montani

TURIN, May 29 (Reuters) - An email sent by Fiat Chrysler Automobiles chief Sergio Marchionne to General Motors (GM) about a possible merger was not the only such conversation FCA has had with other industry players, the Italian-American carmaker's chairman said on Friday.

The New York Times reported on Saturday that Marchionne had emailed GM Chief Executive Mary Barra in March suggesting the two companies combine, but was rebuffed.

Marchionne said on Thursday only that he writes "lots of emails", but Fiat Chrysler Chairman John Elkann confirmed the email had been sent.

"It was not the only email, it was not the only conversation," Elkann told reporters, referring to discussions about possible tie-ups.

Reuters reported in April, citing sources familiar with the situation, that Marchionne was hoping for a big deal, possibly in the United States, to plug the carmaker's weaknesses and cement his legacy before stepping down in early 2019.

Marchionne and Fiat's founding Agnelli family are showing particular interest in GM, sources told Reuters at the time, after the U.S. carmaker's move to tie up with France's Peugeot failed.

Asked if FCA would consider a hostile bid for GM or other players in the sector, Elkann said the company would "act with determination if there are the prerequisites to do something that makes sense", without giving any details.

However, the world's seventh-largest carmaker may have trouble finding a partner. Its debts rank among the highest in the industry, it barely breaks even in Europe and it is expected to burn cash for years. It is also smaller than most rivals.

KEY OBSTACLE

FCA's stock market value of $20.69 billion is far below GM's $58.48 billion and Volkswagen's 106.6 billion euros ($117 billion), ThomsonReuters data shows.

It may be able to persuade smaller companies like Peugeot , whose market value is 15.08 billion euros, to talk, though a key obstacle to any combination would be the issue of closing factories in Europe to achieve cost savings.

Peugeot chief Carlos Tavares was quoted saying earlier this year it was too early to talk about a merger, wanting to focus on his own recovery first.

Nonethless, Marchionne has repeated calls for shrinking the number of players in the global auto industry to help sustain the heavy investments needed to meet demands for cleaner, safer vehicles.

Elkann, a scion of the Agnelli family that controls Fiat Chrysler via its Exor holding company, said he supported Marchionne's call for consolidation, which he hoped would spark a debate in the industry.

He said he had no doubt consolidation would happen, but declined to comment on an ideal partner for Fiat Chrysler or other possible combinations in the sector.

Elkann reiterated Exor would be open to diluting its stake if it meant boosting the carmaker's fortunes. "Exor and my family ... will not be an impediment to a good transaction for FCA," he said.

Elkann said the carmaker had "very good prospects" given Fiat's merger with Chrysler and the new models it has been bringing out as part of a five-year investment plan that aims to increase annual sales to 7 million vehicles by 2018. ($1 = 0.9119 euros) (Editing by Pravin Char and David Holmes)