“Size managed well is good. Size managed for empire-building purposes is nonsense,” Fiat's chief executive Sergio Marchionne declared recently. Assuming he pulls off the mega-deal now in his sights – and he will face all manner of opposition – investors can only pray it becomes an example of the former, not the latter.
Each element makes individual sense. Fiat's newly minted Chrysler alliance brings together two subscale carmakers that lack exposure in markets where the other is relatively strong. Their products have little overlap, and both have strengths to share – Jeep and minivans from Chrysler, stylish subcompact cars from Fiat.
Meanwhile, a tie-up of Fiat and General Motors' European arm – principally Opel – offers sizeable cost-saving potential from reducing the number of engines and platforms used by the two assemblers. The pair would also fit well together, with complementary geographic exposure and distribution in Europe.