The Big Two?

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What’s the first thing that happens after a bad relationship ends?

A new relationship begins.

Sometimes, not quite before the old/bad one has entirely ended.

Often, without much though about the consequences of decisions made in the heat of the moment.

It’s interesting to think about all that as word arrives about GM’s apparent decision to dump its European Opel subsidiary (which appears to be having a down-low affair with Peugot) in order to refocus its declining vigor on the U.S. market, where it continues to bleed market share like an old tire with a slow leak.

GM CEO Marry Barra talks about the need for GM to “disrupt ourselves,” which is her way of saying – crap, we are in trouble!

Right now, GM’s combined market share in the United States is less than what Chevrolet’s market share was in 1970. Things have not been good for years, especially the years after the bankruptcy in ’09  and the cashiering of Pontiac, Oldsmobile, Saturn and Hummer.

Consolidation into just Chevy, GMC, Buick and Cadillac hasn’t helped.

That’s still four full-line divisions vying for a slice of the pie that Chevy alone once had all to itself.

GM’s U.S. market share is still in the low 20s and stock prices (despite a recent uptick) hover in the low $40s – about the same as when the much-touted First Woman CEO took over the helm of the world’s once-upon-a-time Number One in the world automaker.

She has made “ROI” – return on investment” – the new GM mantra. It is why the company is shifting to a rent-by-the-hour business model (more here) and it may explain the odd decision to headquarter GM’s Cadillac and Chevrolet media/press relations offices in Noo York City – a place unfriendly to real journalists who actually drive cars but very friendly to the metrosexual hipster types GM is courting.


The divorce from Opel (after committing more than $1 billion toward “marriage therapy”/restructuring efforts since 2012 alone) would allow GM to refocus on things other than being the world’s Number One automaker.

Like being Number One . . . in America.

Maybe by getting under the sheets with FiatChrysler?

Fiat – which is yuge in Europe – hasn’t been able to make much headway in America. The Italian combine bought the clapped-out wreck that was Chrysler and became FiatChrysler, or FCA – with the idea that Fiat could use Chrysler’s established dealer network to gain instant access to American car buyers for its cars, while also making use of whatever remaining parts of the Chrysler product portfolio still had a pulse (like Jeep, for one).

But the marriage of convenience hasn’t turned out well.

The Chrysler side of things is becoming noticeably peri-menopausal and crow-footed. Aging models like the 300 – and the Dodges that are kin to it, the Charger and Challenger – have clearly been abandoned.

There is nothing new on deck, car-wise.

A clear sign that Fiat wants out.

Does GM want in?

The sale of Opel to Peugot would give GM the cash to take over the FCA operation stateside and – voila – at a stroke, the new combine would be the dominant player in the U.S. market, with Ford the only domestic rival remaining.     

The ego trip of regaining market share – even if only temporarily – might prove hard to resist. The car business is known for such ego-tripping.

And FCA is practically showing tit to lure GM into the honey trap.   

FCA has shed debt – and shed going-nowhere models like the Chrysler 200 sedan and the Dodge Dart. Arrivederci! They spun off Ram trucks from Dodge (a crystal clear sign that the Dodge brand is doomed) and put money into the Jeep brand – which does make money and not just in the United States. Jeeps are sold in Europe and other export markets – and that is no doubt alluring to GM.

GM might be just dumb enough to think with its proverbial dick.

But what a debacle it would be. The automotive industry equivalent of Arnold Schwarzennegger’s tryst with his maid. GM would inherit a stable of old cars – and new liabilities.

Regardless, put money on The End of Chrysler – and of Dodge, too. No matter what happens to Opel, no matter what Peugot does – no matter what GM does – Fiat is going to dump them. There is no doubt. It is merely a matter of when.

If you own FCA stock, sell it. Or prepare to paper your birdcage with it.

Even if GM shacks up with FCA, the Dodge and Chrysler brands are still probably over. GM would have to commit immense sums to rehab the entire Chrysler-Dodge product portfolio in order not just to update them but to make them compliant with the pending slew of federal fatwas, especially the 54.5 MPG CAFE fatwa that is scheduled to go into effect a few years from now. And to do that, cars like the rear-drive-based (and V6 and V8 powered) 300 and Charger and Challenger would need to be completely re-engineered into completely new cars.

Huge money.

Which is why that is not likely going to happen. What is much more likely to happen is the liquidation of Chrysler and Dodge and all the UAW jobs attending.

See above again in re the Schwarzennegger/maid imbroglio.

But Jeep …  now that’s is a tempting little number. There might be “ROI” in that. GM loves “ROI.”

And Fiat’s European operations have appeal, too.

However it all goes down, though, big changes are coming.

Love triangles are always messy… .

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  1. “Fiat – which is yuge in Europe – hasn’t been able to make much headway in America.” — from the article

    It seems a pity that the Fiat 500 did not become more popular, it appeared like such a great practical little car; like the old Geo Metro, but much nicer.

    • Hi CC,

      Part of the problem, I think, is that Fiat lacked the established “name” that (for example) Mini had. People also may have been leery because of Fiat’s reputation from the Bad Old Days.

      But the major problem for them, I suspect, is that fuel is cheap and most Americans simply prefer bigger cars.

  2. GM to re-re-re-reinvent itself? And by uniting with Fiat?!! Apparently Fiat now figures it’s safe to re-enter the US market – I mean, what the hell, nobody’ll remember how we stole out of the US in the dead of night in the Seventies, leaving all the dealers and their hapless customers holding the bag without warranties, parts, or services. Hey, it was the nightmare Carter years – all anybody remembers from those times was the 18% prime rate, 14% annual inflation, the Russians invading Afghanistan, blacks rioting, etc. Yeah, we can sneak back in – the statutes of limitations have all expired by now………………….

  3. As I write this, GM’s current stock price is $36.69, its P/E ratio is a very low 6.11, and its price-to-book is a very low 1.27. Its earnings per share are $6.00 and annual dividend (a highly manageable $1.52) yield is 4.08%. I find all of this quite positive and I own some GM stock!

    It’s “beta” is high at 1.65, meaning it’s theoretically 65% more volatile than the market, but I can’t see GM going under — and Uncle Sam likely “has its back” should it run into trouble.

  4. The US car market is shrinking, fewer people owning car for personal use

    Why? I believe the number one reason is cost/benefit. The benefits no longer outweigh the costs. For many situations, it’s cheaper to move your household close to work, school, and shopping than to pony up 20% of income for a car. And shopping just keeps getting easier with technology.
    Mobility is important; but only because city infrastructure’s have catered to a car-based system. I see many young people SHARING cars already, ahead of the GM move towards renting. My sons, both in their early 20’s, didn’t own their first motor-vehicles until 5 and 6 years after high school.

    Number two reason: cars are built so boring, that young kids just don’t care. Car culture hasn’t represented freedom to the young for a long time, maybe 20 years now, and that is never coming back. Technology is more important than mobility, to them. Besides, with the high cost of owning a car today, many of them are probably contributing to car costs for mom and pop and sharing with the car with them.

    Number three: it’s hip and cool to live a full life without dependence on a car. Yes, I said dependence. If a person can work a decent job, have a decent social life, all without needing a car, that is a huge accomplishment. That person is a hero to many of his peers. Unhooking your life from a car is true freedom, in my opinion. The ability to get around without depending on roads being passable, electricity-for ‘lectric cars- without the free flow of gasoline, or even money, is a tremendous ego booster, not to mention a massive boost to your personal bottom line.

    Lets face it: new car ownership is being shifted upwards towards the top of the heap. The rest of us will have to live on the leftovers, or do without. Heck, my wife and I just priced some late-model used cars-forget it!! I’ll stick with my 11 yr. old KIA

  5. I made a funny audio commercial parody involving GM and their moronic “real people not actors” crap. It is hilarious.
    I have also noticed GM never mentions in these commercials that they lost 10.5 billion dollars when the stock was sold back the govt was holding. Every time I mention it to a new GM car buyer I hear crickets and they look st me like I kid napped their child. GM will never sell a car to me. Havent bought one since 1979.

    • Hi Dave,

      I still have my ’76 Trans-Am, a relic from GM’s better days… but I agree. GM’s attitude is obnoxious and its business practices questionable. It has some cars that are top drawer, like the Corvette and the Impala. But the stink of political correctness and sucking up to Uncle pervades everything they do.

    • Because they happen because of weakness in the industry, not strength. Lets put together two failing companies in the hope that will fix things. Bigger doesn’t fix things, and the fallout from merging only makes things worse. If anything it only spreads the dysfunctional between two companies.

  6. Big question is what Trump will do. If he cuts CAFE and other regs, while cutting taxes, Chrysler might survive on its own (sans Fiat) in the US — especially if he insists it not be killed off, to save all those UAW jobs.

    • Would be nice if he would support cutting regs so that smaller brands could once again compete, but wishing for a pol to do the right thing, well, that’s just silly.

      • That’s the thing. Chrysler could save itself if the regulation was loosened. They could skip going to aluminum for their trucks, which would save a billion or so. They could come up with the next generation of the cars that they do manage to sell (300, Charger, Challengers, even Viper). They could just skip the small cars where they aren’t competitive. They could ditch developing electric and other green nonsense too.

        But that won’t ever happen. The feds would rather then go down, then let them serve their customers, instead of failing to fill government mandates.

  7. What should probably happen. Split it three ways (after cutting Fiat back off). Three independent companies of the remaining worthwhile parts. None of them full line companies, just the parts they are good at. Why is a full line even needed?

    1. Jeep. Just Jeeps. Probably the most valuable part of Chrysler left.

    2. RAM. trucks only, no cars. Maybe SUV’s based on trucks. Maybe give it the minivan for this generations run (since its new).

    3. The third could be a performance brand. Maybe it could be Dodge or Plymouth, maybe Viper. Probably Viper as it likely has the best reputation for today’s buyers. It’s headline vehicle, a new Viper . But that as a very low volume (like it always has been) and new Chargers and Challengers for some volume. This wouldn’t be a very large company, and would probably be the hardest to keep going as there isn’t anything in R+D now. Much smaller then the other two.

    The remaining dealers could sell all three brands. Whatever else is left is dumped.

    Yeah, i know, no chance of this happening…….

    Outside of Jeep, there is nothing in it for GM. Chrysler has little market share left even. They would only discontinue RAM to get it off the market. The rest isn’t worth much. They wouldn’t get Cumming’s diesels out of it even. Maybe let the Pacifica run its course since they don’t have a minivan anymore. All the cars are hosed due to age, poor sales and regulation.

    The reality is, even the big boys can’t afford to develop new vehicles anymore. Dart’s and 200’s are total loses, and it doesn’t look good for Pacifica.

    • If GM and Fiat cut a deal, I wouldn’t be surprised if Toyota swooped in on a deal with Cummins for the straight six diesel when they redesign the Tundra in 2019 or 20. There is simply no value in anything else Fiat/Chrysler. They could come into the HD pickup market with a diesel already in tier 4 compliance, ready for market. Unless GM is smart enough to stake some type of claim to avoid that conundrum. I’m not sure they are.

    • I like your thinking. One thing that could happen also is a redesign of the 300 and maybe a second new model and revive the old Imperial name plate and position the models as true luxury cars. I’d love to see a return of the Imperial name.

  8. “Regardless, put money on The End of Chrysler – and of Dodge, too.”

    As someone who just bought a 2016 Chrysler 300 (used), it’s not something I want to hear, but probably true. One reason I bought it was I recognized it’s a dying breed. The only hope would be if Mister Trump could relax the EPA fatwas at least for a while.

  9. As much as I love my Mopars, I don’t see Dodge being around another 10 years. I wish they would get it together and build mass market cars people want so that I could keep buying/lusting after cars like the Hellcat.

  10. How ironic. The reasons for Fiat’s failure to re-establish its presence in the US market, and for GM’s precipitous decline are exactly the same, namely UNACCEPTABLY LOW QUALITY AND RELIABILITY.

    So these two losers think that doubling down on this defect is their pathway to success?


    • Hi Mike,

      GM and I are at loggerheads, which I am open about. But they do have – my opinion – some good vehicles and a few that are excellent, such as Corvette, Impala and the 1500 trucks.

      But I can’t make sense out of keeping GMC or Buick. Not that the cars (and trucks) aren’t good. The problem is they are duplicative/badge-engineered and superfluous.

      And GM also deserves raspberries for trying to cower the automotive press by screwing any journalist who writes such things about the company.

      I say this as both a journalist and as someone who was for years a big fan/owner of GM vehicles.

      • Does Chevy do to their 1/2 tons what they’re STILL doing to their 3/4, 1-ton and medium-duty trucks? Wax the frames instead of E-coating them? That is disgraceful. The wax comes off at the drop of a hat, and the frames start to rust.

        • “But I can’t make sense out of keeping GMC or Buick.”

          The reason they keep Buick is China – they sell at least 3 times as many cars there as here. Maybe also as a North American outlet for their overseas models (ex/ Regal).

          For GMC, it’s most likely the Denali line which is a cash cow.

          • There would be nothing stopping them from keeping Buick,,,,,in China. The brand should be ditched here, there is no reason for it to exist anymore. Just rebadge the fancier Chevy’s as Buick’s there, its not like they know the history of Buick anyway.

            • Apparently the Premier or some other bigwig drove a Buick in China back in the 1930s, so now many Chinese see Buicks as an aspirational brand. If they kill it here, I don’t know that it would continue to have that appeal.

              • I see Buicks rarely… I see Buick as the Oldsmobile of 2017. It hasn’t got a tangible reason for being that I can grok. Imagine if, as a counterpoint, there was a slightly nicer Toyota that wasn’t quite a Lexus…

                And GMC is preposterous. Re-sold/tarted up Chevys that aren’t quite as tarted up as the resold Chevys sold by Cadillac.

                • “I see Buicks rarely”

                  If you go to China, you’ll see lots of them. I was there in 2001 and couldn’t believe how many I saw. Many were models not sold here. Buick and VW were the biggest brands along with quite a few German brands – mostly Audi.

                  Around here (central NC), I see quite a few – most driven by older folks ha ha (true to the stereotype).

      • Eric, I drove 350 miles or more in Texas yesterday and once out of West Tx nearly every pickup was a GM. I was surprised since the west part is a good mix of the big three and lots of Dodge pickups. The closer I got to San Antonio the more it boiled down to GM and Toyota with some Dodge trucks. As the economy winds down new trucks are government or business owned. Subsidy farmers still buy new but I see more 90’s GM’S that have been born again, some with new paint and fairly much everything else. A sign of the times unfortunately

      • It is absolute insanity that Buick and GMC Truck are still around.

        Wouldn’t you like to attend the meetings where their existence is defended?

        Barra ought to sell these two lines exclusively through Sears and Kmart.

  11. Corporations being run by women; Catering to government edicts more than the customers; Producing a product which is too expensive for the average person to buy ($70K full-size pick-up trucks? REALLY?!); Planned obsolescence/unsustainable complexity; Executives schooled in pie-in-the-sky business theories professed by burnt-out ex-hippies who are now employed by Uncle, but who have never held a private sector job in their life, much less ran a business….

    Is it any wonder we’re seeing business after business, in industry after industry implode?

  12. The thing to watch is if FCA loads Chrysler up with debt¹. If that happens, a sale to The General won’t be far behind, as GM just isn’t smart that way.

    ¹Sort of like how Daimler-Benz stripped the carcass of anything valuable prior to the sale to Fiat.

    • That’s what has lead to Chrysler’s destruction: the lousy merger with Daimler-Benz back in 1998. Mostly due to Bob Eaton’s fear that Lee Iacocca might try another buyout to take the company private like he tried in 1995.

      I think Iacocca wanted Chrysler to be a successful player in the US auto market. Eaton? I don’t think he cared one way or the other.


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