Who Will Buy FCA – Why Not Toyota?
First, let’s acknowledge that Toyota Motor Corporation (TM) has publicly rejected any interest in Fiat Chrysler Automobiles (FCAU), leaving FCA CEO Sergio Marchionne to pine for Mary Barra’s attention.
As the world’s largest most successful automaker, Toyota certainly doesn’t need FCA. And there are probably very good reasons why Toyota shouldn’t consider it at all.
But on closer inspection, there may be more reasons for Toyota to consider acquiring FCA than you might think. Here’s my 10:
Trucks – Toyota had big dreams for Tundra which have only been partially realized. Adding Ram trucks to the portfolio would be a big step in competing with GM and Ford in this high-profit segment.
Diesel – With all of its engine expertise, Toyota does not have a strong heritage in diesel engines for passenger vehicles. This would help in both the big truck and small car segments – and in developing markets. Of course, this assumes that VW’s diesel issues don’t extend to other manufacturers.
Jeep – One of the most valuable brands in the world that would stand out in any automaker’s portfolio.
Design – Toyota has made a lot of money over the years with inoffensive or polarizing designs. They’re making great strides here but access to FCA designers from around the world (Alfa Romeo, Maserati) could favorably inform Toyota’s style. Recall the Italian design influence on the MR2.
Europe and South America – Both regions have been significant challenges for Toyota. FCA’s diesel technology and Fiat’s small cars would provide a big opportunity.
Muscle cars – Until the long-awaited Supra shows up, the Dodge Challenger would give Toyota Motor a true challenger for Mustang and Camaro. And perhaps the company that brought us the Lexus LFA would consider saving the far less expensive Viper.
Capacity -- Toyota has had to shift some Camry production to Subaru in Indiana but this will end. FCA could offer additional factory lines without Toyota having to build new plants.
Globalization and Diversity – Toyota has made great strides in these areas but is still dominated by the US and Japanese markets. FCA would make Toyota much more truly global and provide a new talent pool of executives from around the world.
Hybrids, Hydrogen – With no real presence in hybrid vehicles, FCA could extend Toyota’s platforms for these leading technologies. And this could significantly and favorably impact adoption of hydrogen.
Manufacturing and Quality – Bringing the vaunted Toyota Production System to FCA would be a much-needed boost to long-term FCA quality issues. Fiat and Chrysler rank at the bottom of the recent JD Power IQS.
Five reasons why Toyota shouldn’t spend any time on this:
Quality – Rapid expansion was cited by CEO Akio Toyoda as a prime cause for Toyota’s quality issues earlier this decade. With Toyota and Lexus back on track, FCA would be a big distraction.
Dealer Network – The Toyota and Lexus dealer networks lead the industry in sales per franchise. FCA ranks as follows: Jeep #19, Dodge #22, Fiat #23, Ram #25, Maserati #28, Chrysler #29.
Weak Brands – Other than Jeep, FCA offers mostly second tier brands (in the US) and might not add much more than volume to the overall strength of Toyota’s brand portfolio.
Mazda, Subaru – Toyota already has strategic investments in these brands. And it forms other alliances as needed (BMW). Would FCA offer any more value to offset the considerable cost?
UAW – Having managed to introduce the Toyota Production System in North America and provide direct jobs for 39,000 in the US without having to work with the United Autoworkers union, there might be little benefit to join forces now (although Toyota does have experience with the UAW from its former NUMMI GM joint venture).
Would Toyota ever do it? Yes, there are more pros than cons but the cons weigh heavily. The fears of rapid growth are still fresh in their minds in Toyota City.
Should they do it? The most powerful argument might be the market penetration in historically weak regions. It will take Toyota decades and billions to start to match long-entrenched competition in these areas.
Toyota can be trusted to have thoroughly vetted this option and has reportedly made a good decision to pass on FCA. But the potential synergies are intriguing, which I am sure is not lost on the investment bankers. Stay tuned.
Note: This article is 100% based on public news reports and my personal conjecture; it is not the result of any input or confidential information from either Toyota or FCA.