• by Karl Greenberg , Staff Writer, June 23, 2015

The Chrysler name means improbable, impossible, and sometimes outrageous. The fact that the FCA U.S.A. unit is still alive after all these years is itself remarkable, given its revolving-door experience with the intensive care unit. From K Cars, to the merger of equals; from “other people's money” firm Cerberus buying and flipping it, to Fiat SpA merging with it to bring it back to life. All improbable. 

What could top that? How about a merger with General Motors? Oh, come on!! What idiot would dream that up? FCA’s CEO Sergio Marchionne? Yes, it's serious. He's bankered-up with UBS to support his argument to GM's board that a merger would be a good thing. 

There's some sense to it. The best time for a small boat to prepare for a storm is when the sea is calm. The best plan is to tie up to a bigger boat. Yes, good(ish) times are the best times to create production/development efficiencies for when the market turns south. That is especially true if the automaker needing stability is trying to push debt through the scuppers. 

Mary Barra, Marchionne's counterpart at GM, has reportedly brought in Goldman Sachs to argue against the proposal. It’s no joke. General Motors is a mostly publicly traded company, meaning it has to commit time and energy to every suitor. To a company with a board representing big stakeholders saying “no” isn’t going to do it. Barra has to say it and sell it. The company had to fend off merger pressure in the past from the likes of Carlos Ghosn at Nissan-Renault. In the Nissan-Renault case, major stockholder Kirk Kerkorian, rest his soul, put the screws to the company to do the deal. Kerkorian was represented on the board by former Chrysler executive Jerry York, whose recommendations to kill some brands actually came to pass, a good thing for GM. 

FCA, the sixth-largest automaker, obviously needs to watch the horizon more assiduously than the second biggest, which has ballast from a huge global operation, including in China, all of which reduce per-vehicle production costs, e.g., economies of scale, freeing up capital for projects, debt payment, etc. While FCA has had a strong run for the past five years, that has slowed recently, possibly in part because Marchionne may be holding the reins on product development pending a salubrious partnership. 

FCA’s debt limits its product development potential. The industry isn't kind; the pressure to engineer innovation is constant and, if anything, accelerating. 

Fortune reported early last month about Marchionne's proselytizing on collaboration: how he said automakers sharing operations could return $2.8 billion to $6 billion to investors because they would not be duplicating costs in plants, technology, processes and costs related regulatory compliance. 

He also has made a good point that there is no brand-equity value in individual components, engines for example. Most people aren’t car buffs and couldn't care less who built the engine in their car as long as it works. He essentially made that point. He's right. We only learn about the failure of collaboration or original equipment “subterfuge” when there is a major fail. That list of those is too long to recount. But if the wheel doesn't squeak, nobody's the wiser. 

Fortune reports, meanwhile, that Jeep Grand Cherokee, Wrangler, and also the next Ram 1500 pickup are among vehicles on hold. It would make sense strategically since holding off on their development and launch makes a deal more appealing because whoever comes on board as a partner would, presumably, get some efficiencies for themselves in the development and manufacture of the new products. 

Marchionne and FCA spokespeople have said otherwise — that the timing reset for these critical vehicles has to do with the return of the larger Grand Cherokee Wagoneer. Whatever the reason, the stakes are very high: these products are big revenue drivers for FCA. And, broadly speaking, there is no move here that is without risk for FCA. But that’s true of every automaker, all the time, regardless of size. From that perspective, alliances make all the sense in the world. On high seas, a catamaran is probably a better bet than a kayak.