Merge or die: Fiat boss urges consolidation

Italian-American alliance, Fiat Chrysler Automotive (FCA), has issued a 25-page report calling for all car makers to rapidly increase the amount of shared components including engines and transmissions in the cars it makes.

FCA claims more component sharing could save billions by slashing the huge R&D budgets manufacturers set aside to develop powertrains, suspensions and braking systems.

According to the report, in 2014 alone, $160bn was invested in R&D by the world’s biggest car-makers.

This, says the report commissioned by FCA, is unsustainable as R&D budgets of the future are expected to spiral out of control with the introduction of more sophisticated new tech like autonomous driving.

Cars, unlike aircraft, have shorter lifespans which makes it difficult to recoup the larger R&D spends.

The author of the report encouraged car makers to immediately share the cost of developing the 40-50 per cent of R&D costs in technologies and components that are “indiscernible to the customer.”

In future car makers, says the report, should share the cost of R&D, platforms, transmissions and even factories.

This approach has been seen by industry pundits as yet another move closer to the telecommunications industry that share hardware and software and are then assembled elsewhere.

Recently, both Volkswagen Group and Toyota have made huge efforts to increase commonality.

Volkswagen is rolling out its new MQB architecture that, as well as the majority of its line-up, will also underpin its light commercial vehicles.

Toyota, meanwhile, has unveiled its new TNGA that will halve its current 100 platforms and sub-platforms it uses globally.

The ambitious plan for more sharing has been criticised by some auto analysts since it would take at least a decade for car makers to align their product cycles.

Stressing the importance of consolidation to newswire, Bloomberg, FCA boss Sergio Marchionne said: “We need to find a way to get this done.

“I could give you list of reasons as to why you would be scared of doing it, I get it,” he said. “But you have to be able to take leadership. You have to be able to stand alone when you make these calls. Make the bloody call. That’s what they pay you for. They pay you to lead. Not to execute somebody else’s will.”