Fiat Chrysler Automobiles CEO Sergio Marchionne. Picture: BLOOMBERG/DANIEL ACKER
Fiat Chrysler Automobiles CEO Sergio Marchionne. Picture: BLOOMBERG/DANIEL ACKER

Milan — Fiat Chrysler Automobiles is in talks with South Korea’s Hyundai Motor about a partnership to develop hydrogen engines.

The alliance, which would also cover transmissions, could become "a strong one", Fiat Chrysler CEO Sergio Marchionne said on Saturday at the Alfa Romeo Museum in Arese, near Milan.

Hyundai said on Monday: "We welcome the interest from other car makers in our advanced transmissions and hydrogen-powered technologies."

Co-operation on hydrogen propulsion would come despite electric-powered cars being established as the dominant technology in the emerging post-fossil fuel era.

Hyundai initially led the commercialisation of fuel-cell vehicles, though it has fallen behind Japan’s Toyota Motor in terms of sales, while Fiat backed away from hydrogen power earlier this decade.

"There is the potential of a technical partnership with Hyundai, which already supplies some components and transmissions for the US," Marchionne told reporters after a presentation on Alfa’s planned Formula One return.

"Let’s see if we find a deal to develop transmissions and hydrogen."

Marchionne, a vocal proponent of consolidation among car makers, having led Fiat’s takeover of Chrysler, said there was no likelihood of a merger with Hyundai.

Shrinking size

Hyundai shares fell 1.2% to 159,500 won at 11.23am in Seoul on Monday.

The Seoul-based car maker is working on shrinking the size of a fuel-cell powertrain to one that is comparable to an internal-combustion engine, so that it can fit into various models as well as reduce costs.

Hyundai makes the ix35 Fuel Cell and plans to release a long-range hydrogen-powered SUV next year.

Fiat Chrysler has focused on electric developments, though on a limited basis. The company has offered a plug-in version of the 500 subcompact that is available only in California, and last year introduced a hybrid variant of the Pacifica minivan.

"It can be a win-win situation for both car makers," said Koh Tae-bong, a senior analyst at Hi Investment & Securities in Seoul. "If the report turns out to be true, Hyundai would be able to sell fuel-cell engines, an area where Japanese car makers are ahead, while Fiat Chrysler can expand its lineup with fuel-cell vehicles."

Marchionne has said Fiat Chrysler will push forward with electrification but does not see it as the sole alternative to traditional engines.

Hyundai Motor affiliate Hyundai Mobis is an established supplier, providing a six-speed transmission for the Jeep Compass Patriot.

Five-year plan

Marchionne, who at 65 is preparing a five-year business plan before retiring from the post in 2019, confirmed plans to spin off Fiat Chrysler’s Magneti Marelli and Comau component businesses into separate companies by the start of 2019.

The mechanism has not been decided, but could include selling a stake to raise cash.

A spin-off of the Alfa Romeo and Maserati brands was too remote to be discussed at the moment, Marchionne said, while highlighting the importance of motor racing in Alfa’s development.

A return to Formula One could help polish the marque’s image as it seeks to rebuild an upscale reputation.

Marchionne has invested billions of dollars to develop new vehicles after the Alfa line-up shrank and sales collapsed in the last decade.

Formula One’s global appeal will bring wider exposure after previous attempts to expand beyond Europe were delayed.

Financial goals

The CEO confirmed Fiat Chrysler’s financial targets for 2018, including an increase in operating profit to about €9bn and the elimination of debt. He said he anticipated "manageable costs" from a diesel investigation that Fiat is facing in the US.

The issue "will cost us something, but we have reduced the risk expectations", Marchionne said, adding that a separate French probe was groundless.

Marchionne, who met with US Vice-President Mike Pence and other officials at the White House this week to discuss Nafta concerns, said he did not see Donald Trump’s administration leaving the North America Free Trade Agreement.

"They want to find a solution that somehow re-establishes the American interest being more important," he said. "They think they gave up too much at the table and they want some of it back. The question is how much and when."

Bloomberg

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