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Does GM’s European Sale Indicate the Start of Merger Mania in the Auto Industry?

After PSA Group, a French conglomerate, bought GM's Opel this week to become the second-largest carmaker in Europe, it could be a signal that more tie-ups are coming, agree some leading industry executives.

Sergio Marchionne, CEO of Fiat Chrysler Automobiles, has long called for consolidation within the auto industry, as well as an aggressive "rationalization of capacity," a fancy way of referring to plant closings and job cuts. The alternative, he has warned, will be wholesale economic catastrophe the next time the global auto industry goes into a slump, with some manufacturers failing and investors unwilling to give others the funds they will need to revive.

Fiat Chrysler Automobiles CEO Sergio Marchionne speaks at the 2017 Geneva Motor Show in Geneva, Switzerland. Paul A. Eisenstein

Years of frustrating losses were behind the decision by General Motors to dump the German brand it has owned for nearly eight decades, selling its Opel/Vauxhall subsidiary this week for $2.2 billion to France's PSA Group. The deal was formally announced just a day before the opening of the annual Geneva Motor Show, and it quickly became the hot topic of conversation inside the sprawling PALExpo convention center, where industry leaders and journalists came together for two days of previews.

Related: Why Did GM Ditch Its European Business?

Though the deal is expected to be completed later this year, the transition "is going to be (over an) extended period of time," GM President Dan Ammann told NBC News, noting that Opel is just launching the new Insignia in Geneva. The sedan will continue to be based on a GM platform, and use many GM parts for at least six more years. Meanwhile, General Motors will continue selling some Opel-based models in the U.S. and China, such as the Buick Cascada, for some time.

GM Could Buy a Stake in PSA

In fact, GM formed an ongoing relationship with PSA early this decade and it not only has a series of joint ventures in the works, but has the option to purchase a sizable stake in the French automaker. Opel could actually be the bridge bringing the two companies together as part of a much more extensive alliance in the coming years.

That could mirror the moves made by PSA's French rival. Renault pumped $6 billion into struggling Japanese automaker Nissan in 1999, forming the Renault-Nissan Alliance, arguably the most successful such partnership in the auto industry. So successful, in fact, that Daimler AG, the parent of Mercedes-Benz, came in as the third leg of the stool a few years ago.

Related: Good and Bad News in Earnings Reports From Fiat Chrysler and Ford

Daimler has no direct economic stake, but it has launched billions of dollars in joint projects with Renault and Nissan, everything from component purchasing to the sharing of engines and vehicle platforms.

Such alliances, in various forms, are expected to become even more common, said Carlos Ghosn, CEO of the Franco-Japanese alliance, because the cost of doing business is becoming ever greater — especially as manufacturers struggle to fund all the technologies they expect to need in the near future, from electric drivetrains to autonomous driving.

"If we had the opportunity, we would add (more automakers) to the alliance," Ghosn said during a Geneva media gathering.

Not Always a Happy Marriage

Alliances offer a variety of different ways to pair up, and individual members generally retain some level of independence. But that isn't the approach for everyone, and takeovers remains on the table. Volvo was purchased by Ford at the beginning of the millennium, then sold to China's Geely as the Detroit automaker struggled to right itself during the last recession. Ford also sold off its Jaguar and Land Rover units to India's Tata Motors.

The auto industry has, in fact, seen plenty of dating and marriages, but Fiat Chrysler has remained on the outside looking in, despite Marchionne's unusually public desire to find a partner — whether in the form of an alliance or acquisition.

FCA has reportedly talked to numerous other makers, including General Motors, which repeatedly rebuffed Marchionne's overtures. "I shamelessly knocked on the door, but they never answered," he said in Geneva.

That said, some sort of deal "is required," Marchionne declared in Geneva, "and it will happen, whether it is on my watch or somebody else's." And it won't be just FCA.

Reshaping the Industry — and Avoiding Bankruptcy

There are too many independent players in the business and, worse, far too much excess capacity, said Marchionne. And that's particularly true in Europe.

"There has to be a rationalization of capacity," he added, something that is normally easier as two manufacturers come together and move to shed overlapping operations. Excess capacity — with plants operating well below breakeven — all but destroyed industry profits during the recession, sending two of Detroit's Big Three into bankruptcy.

U.S. makers responded by closing a score of plants, but despite suffering a longer recession, one only now really ending, European makers have cut far fewer facilities and shed relatively few jobs.

And, in an era of increasing populism, industry observers fear that it could become even more difficult to maneuver in the auto industry. Some countries may balk at seeing industrial crown jewels sold off, or resist job-destroying plant cuts.

But observers believe that automakers will have no option but to try to reshape the industry. There are, if anything, too many new players coming into the global business, whether ambitious Chinese firms like Volvo's parent Geely and BYD, or start-ups like Tesla and Faraday Future. They are threatening to compound the issue of excess capacity and increase the hunt for new investors.