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GM may have 'thrown out baby with bathwater' in Opel sale, says Fiat chief

General Motors (GM) may have "thrown out the baby with the bathwater" in the sale of its European Opel and Vauxhall brands to French rival Peugeot, the head of rival firm Fiat Chrysler (FCA) has told CNBC.

FCA CEO Sergio Marchionne said that while he appreciated the rationale for shedding the long-time loss-making division, he criticized the basis on which the deal had been executed.

"There's no doubt that I think Mary (Barra, GM CEO) and her team are focusing on improving the profitability of the house and this is seen as a quick fix to a problem which has been sitting inside GM for a long time," he said Tuesday on the sidelines of the Geneva Motor Show.

He noted that the marginal improvement in return on invested capital did not provide a sufficient justification for the terms of Monday's sale.

"I understand that they (GM) want to get out just to get rid of the problem, but you may have thrown out the baby with the bathwater," he added.

Turning to look at the transaction from the perspective of the buyer, PSA Group, owner of the Citroen and Peugeot brands, Marchionne implied that the jury remained out for now.

"If it's true that the benefits that PSA is going to get out of this deal are of the caliber that he's talking about then the profitability of that business at PSA will actually be acceptable. It's not extraordinary but it's not bad," he surmised.

Fiat Chrysler CEO Sergio Marchionne
Brendan McDermid | Reuters
Fiat Chrysler CEO Sergio Marchionne

Earlier at the same event, PSA CEO Carlos Tavares had told CNBC that he was confident that his company had the experience to execute the recovery needed at the newly acquired operation.

"Everybody knows the turnaround, everybody can see the results … Because we have succeeded in our own turnaround we may have a chance to help Opel to become also a great company," asserted Tavares.

Border tax proposal

Turning to address political issues linked to his late January meeting with U.S. President Donald Trump, the FCA chief contended that a broader discussion about the U.S. Republican Party's much-hyped border tax proposal still remains to be thrashed out before clear conclusions about its economic impact can be drawn.

Trump has spoken at length about lowering the tax burden on U.S. businesses. Meanwhile, Republicans in the House of Representatives have also proposed a reduction in U.S. statutory corporate tax which would likely lead to the introduction of a U.S. border tax adjustment, although plans are as yet unconfirmed.

"It's possible that a proper set-up of a border tax arrangement will not effectively increase prices for consumers especially if you drop the corporate tax rate. It ain't over. Let's run through the numbers. We need to see this in more detail," Marchionne declared, before demonstrating some sympathy for the president's ambition to initiate an automotive industry manufacturing renaissance within the U.S. at the expense of some overseas production facilities.

"If you were to look at the development of U.S.-Mexico manufacturing split that's happened over the last 15 years, some of the moves that we have made collectively have been questionable …So we need to be honest and we need to be realistic about what can be repatriated in an effective way," he suggested, adding that by not taking affirmative action, the domestic industrial decline would become even worse.

Having headed up Fiat from 2004 until he became CEO of FCA following the Italian marque's 2014 merger with Chrysler, Marchionne has long said that he will step down following the completion of the company's five-year strategic plan, scheduled to finish at the end of 2018.

Noting that he would therefore not be around to carry out any further large scale potential mergers and integrations between FCA and other carmakers, he opined that GM would still be the most desirable merger partner.