GM’s Batey on Mergers: Thanks, But No Thanks

DETROIT – General Motors North American President Alan Batey says unlike his cross-town rival Sergio Marchionne he sees no urgency for a merger to slash product-development costs, preferring instead to pick and choose collaborations where it makes sense.

“We collaborate if we find partners with similar needs and requirements,” Batey tells WardsAuto during an interview at the North American International Auto Show here.

“We have scale. We are truly global,” he adds. “We’re able to think globally. In the future, I don’t see that changing.”

Marchionne, CEO of FCA US, brought the Chrysler and Fiat entities together in 2009, and at the show earlier this week said additional industry consolidation would be inevitable because of the capital-intensive nature of the business. It also would make the companies more attractive to investors, which he thinks undervalue automakers.

“The cost of executing (product launches) is in excess of what a mature industry is able to afford,” he told journalists. “Look at how capital markets value auto stocks. We are assigned incredibly poor valuation.”

Marchionne concedes an FCA merger is unlikely during his tenure and admits there is much industry skepticism over such activity, especially after the debacle of Daimler and Chrysler.

Consider Batey among the skeptics.

“Look back over the last 20 years and you see true mergers are quite difficult to execute,” he says. “We’ve seen them created and unraveled.”

Look instead for GM to continue collaborations, such as its work with Ford on transmissions in the U.S. and with PSA Peugeot Citroen on vehicle platforms in Europe.

“Rather than mergers, it’s about collaboration around specific technologies, components or requirements,” he says.

Batey expects a healthy North American market in 2015, including upwards of 17 million light-vehicle sales in the U.S. WardsAuto forecasts LV sales of 16.8 million units.

“It’s going to be a good market,” he says. “But let’s be honest, things can change quickly. If you asked me six months ago if I thought fuel prices would be where they are today, I’d ask why you would ever ask such a question. So there is some caution.”

Batey says low interest rates also continue to serve as a tailwind in the U.S., and he thinks consumers are finding tremendous value in the industry’s products. However, it will be a dogfight for every sale.

“The competition will be fierce,” he admits. “There will be a lot of intensity around North America, because the other markets are struggling.”

European luxury automakers, in particular, are widely assumed to be taking advantage of the North American market with aggressive pricing to make up for weaknesses in the their home regions. Batey does not see that affecting Cadillac, which saw sales last year slump 6.5% in the U.S. as it continues to retool its product lineup and marketing approach.

Cadillac boasts unique market position, Batey says.

“The great thing about Cadillac is it has a unique position,” he says. “It is authentically American and has very distinctive design cues. We’ve shown we can deliver performance, and I think there are a lot of people out there looking to differentiate themselves.”

At the show Cadillac offered the 640-hp CTS-V, which beats output figures from similar BMW and Mercedes models. At the car’s unveiling, GM demonstrated its commitment to the brand with news of a plan to sink $12 billion into Cadillac over the next five years.

“We’re introducing some very interesting (Cadillacs) for people,” he says. “The key is, we have to put (people) into seats.”

Looking ahead to the new year, Batey says he hopes to capitalize on the new strength he sees between GM and its dealers after last year’s recall crisis brought the sometimes adversaries closer together.

“We’ve got a relationship that’s tighter and more cohesive than we’ve ever had before and now is our time to capitalize on that with an arsenal of new products,” he says.

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