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Sergio Marchionne, CEO of Fiat Chrysler, set off on a quest to find a merger partner last year, but was rejected by General Motors, which was the focus of much of his interest.REBECCA COOK/Reuters

Sergio Marchionne has given up on finding a merger partner for Fiat Chrysler Automobiles NV for now, but he is not abandoning his view that auto makers must consolidate amid the technological change that is sweeping the industry.

FCA, the combination of Italy-based Fiat Automobiles and Detroit-based Chrysler, will focus on meeting its own profit and debt-elimination targets by 2018 before looking again for a marriage that would help finance the costs of technological change, Mr. Marchionne, chief executive officer of FCA, told reporters at the North American International Auto Show in Detroit on Monday.

"This industry in its current state is not in a position to withstand the capital requirements associated with running the business," he declared. "It just can't."

Mr. Marchionne set off on a quest to find a partner last year, but was rejected by General Motors Co., which was the focus of much of his interest. A combination of FCA and GM would have made the most sense, he said at the time, and reiterated the thought again yesterday.

His search for a merger was driven in part by his view that the auto industry is not earning its cost of capital. Auto makers face enormous expenditures over the next few years to develop new technologies to meet environmental regulations and address the onslaught of potential competition from ride-sharing companies and Silicon Valley in autonomous vehicles.

"Capital will continue to be wasted on this," he said, by auto makers determined to go it alone.

A combination of two or more auto makers – or even more joint ventures on engines or battery development – would reduce costs because the expenses would be spread over millions more vehicles than if auto makers decide to develop the technologies themselves.

The billions of dollars in costs required to develop these technologies could lead to a major restructuring of the industry, said Jay Baron, who heads the Center for Automotive Research, an automotive think tank based in Ann Arbor, Mich.

That restructuring could include mergers or bankruptcies, Mr. Baron noted.

"Everybody is under the gun and under pressure, but the smaller companies more so than the bigger companies," he said.

For now, FCA will focus on the 2018 plan, which Mr. Marchionne said will transform the company into a debt-free organization.

"The achievement of the plan will create a car company that is fundamentally different from the one that we're looking at today and will put it in a position to have a different type of dialogue with people who were otherwise not interested" last year when FCA raised the prospects of combining operations, he said.

It's possible, he said, that after the current transformation, auto makers may end up relying on suppliers to provide batteries for electric vehicles and almost all the other components of a vehicle except engines and vehicle design and development.

"If that's true, then the role of auto makers as such needs to be redefined," he said. "How it gets redefined in this changing world with intruders trying to come in and occupy space is the biggest challenge."

Among the "intruders," as he put it, are Apple Inc., which is rumoured to be developing vehicles, and Google Inc., whose driverless vehicles are already being tested in California and elsewhere.

Silicon Valley will play a major role in the transformation of the industry during the next several years, Mr. Marchionne said.

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