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General Motors Rejects Fiat Chrysler's Merger Proposal - Analyst Blog

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General Motors Co. GM has turned down the merger proposal by Fiat Chrysler Automobiles N.V. FCAU. Fiat Chrysler had planned this mega merger in order to cut costs, per media reports. The proposed merger would have resulted in significant cost savings and led to the creation of an automotive giant.

Reportedly, General Motors’ executives were not interested in this merger proposal. General Motors, which currently carries a Zacks Rank #3 (Hold), will continue with its investment plans for product development. The automaker is focused on making investments in innovative technologies and vehicles, which should provide sustained growth while maximizing shareholder value.

Sergio Marchionne, the CEO of Fiat Chrysler, which is the world's seventh-largest carmaker, was considering a merger, possibly in the U.S, to reduce the company’s weaknesses before stepping down in early 2019. Fiat Chrysler is under pressure as it has the highest debt levels in the auto industry and barely manages to break even in Europe.

Marchionne stated that if Fiat Chrysler is unable to merge with traditional automakers, he might forward the proposal to Silicon Valley companies, including Google Inc. GOOG or Apple Inc. AAPL. Both Google and Apple are planning to offer alternatives to traditional cars or car ownership.

General Motors generates significantly higher earnings compared to Fiat Chrysler. General Motors recorded adjusted earnings of 86 cents per share in the first quarter of 2015 compared with 29 cents per share in the first quarter of 2014. On the other hand, Fiat Chrysler recorded earnings of 6 cents (€0.052) per share in the first quarter of 2015, rebounding from a loss of 18 cents (€0.155) per share in the year-ago quarter. Fiat Chrysler reported revenues of $28.8 billion (€26.4 billion), up 19% year over year. The year-over-year improvement in the top line was backed by better results in the NAFTA, EMEA and Components segments, partially offset by a revenue decline in the LATAM and Maserati segments. General Motors' revenues in the reported quarter however declined 4.5% year over year to $35.7 billion.

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