Tag Archive | "Fiat SpA"

Chrysler’s Makeover Aids Fiat

Sergio Marchionne had what he called a “once in a lifetime” moment in 2009 when President Barack Obama selected Fiat SpA to save Chrysler Group LLC. The head of both automakers may be having flashbacks as the tables turn.

The previously bankrupt U.S. company, which became majority owned by Fiat this year, is now shoring up its Turin, Italy-based parent, as the European debt crisis depresses sales, according to The Detroit News. Chrysler is due to outpace Fiat’s operating profit by 87 percent in the second half, and the gap will likely continue in 2012, says a Bloomberg News survey of analysts.

“Fiat would be very vulnerable now without Chrysler, with few industrial and financial options on its hands,” said Emanuele Vizzini, chief investment officer at Investitori Sgr in Milan, who sold Fiat shares in August.

While Chrysler’s revitalization offers Fiat a cushion for Italy’s downturn, Marchionne’s turnaround of the Auburn Hills company has deepened its woes in Europe. With the U.S. unit hogging development and management resources, Fiat has been left with aging models and eroding market share, putting Italy’s largest manufacturer at the mercy of volatile Chrysler earnings.

“Long-term, neither Fiat nor Chrysler would have made it on their own,” Marchionne said this month. “Fiat was too small and too handicapped by an inadequate business model in Europe to have any hope of a future.”

Chrysler may post earnings before interest, taxes and one- time items, of 864 million euros ($1.18 billion) in the second half of 2011, compared with 462 million euros from Fiat’s traditional operations, according to the average estimates of six analysts. Trading profit for the U.S. automaker, which was consolidated into Fiat results from June, may reach 1.91 billion euros next year, 77 percent more than Fiat’s 1.08 billion euros.

The turnaround at Chrysler hasn’t helped Marchionne win over investors to his plan to create a global auto group to rival Volkswagen AG. The shares have fallen 40 percent in the last three months, the second-worst performer in the Bloomberg European autos index after France’s PSA Peugeot Citroen.

“If Fiat is depending upon Chrysler, that’s a bad bet because Chrysler is still a question mark,” said Gerald Meyers, a business professor at the University of Michigan. “It will be two to three years before we know whether Chrysler is going to even be successful, much less sustainable.”

Chrysler, under three different owners in four years, recorded net losses totaling $34 billion from 2006 through 2010, according to the automaker’s filings with the U.S. Securities and Exchange Commission.

Moody’s downgraded Fiat to two notches below investment grade last month on concern about the financial stability of the combination with Chrysler. The rating company also cited infrequent model renewals in Europe and increasing competition in Brazil, where Fiat is profitable.

Marchionne, who acknowledged in an April interview that he neglected European operations in favor of a U.S. turnaround, postponed the launch of new Fiat models when the 2008 financial crisis hit the car market and is doing the same again.

Aside from a rebadged version of the Dodge Journey, the overhauled Panda subcompact, which was unveiled last month, was the first all-new model for the Fiat brand since the retro- styled 500 in 2007. In the U.S., 75 percent of Chrysler’s lineup has been updated since the executive took control in June 2009.

That product strategy has resulted in Fiat’s European market share shrinking to 7.3 percent through August from 8.2 percent a year earlier as deliveries tumbled 13 percent, according to the European Automobile Manufacturers’ Association.

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Fiat Sales Chief Resigns

MILAN — Italian auto maker Fiat SpA on Tuesday said Andrea Formica resigned as head of its namesake Fiat brand amid a management overhaul following its acquisition of a majority stake in Chrysler Group LLC.

Although Fiat didn’t elaborate, industry analysts suspect Mr. Formica’s departure, effective Sept. 1, was likely due to the auto maker’s poor sales performance in Europe, its traditional market, reported The Wall Street Journal.

Mr. Formica, 50 years old, couldn’t immediately be reached for comment. Fiat confirmed reports in local newspapers of his impending departure.

Mr. Formica joined Fiat in September 2010 after leaving Toyota Motor Corp.’s European operation, where he was senior vice president of sales, marketing, product planning and communication.

In addition to being chief executive of the Fiat brand, he was also responsible for sales at the Fiat’s two other brands: Lancia and Alfa Romeo.

However, when Fiat announced at the end of July the creation of a new executive team, called the Group Executive Council, it didn’t include Mr. Formica among its members. It instead named Olivier Francois to head the Fiat brand.

Mr. Francois is already head of marketing for all of the Fiat and Chrysler brands. His additional title as head of the Fiat brand will be different from the one held by Mr. Formica because it will focus on brand development. The new team, which will oversee the operations at both Fiat and Chrysler, comes into effect on Sept. 1.

Another of Mr. Formica’s responsibilities, sales in Europe, will be taken up by his predecessor, Lorenzo Sistino, who joins Mr. Francois as member of the new management team.

Mr. Formica arrived at Fiat as government incentives for the purchase of small, environmentally friendly cars expired and concerns persisted about the economy, contributing to a drop in auto sales across Europe. He also had to deal with a relatively small offering of new models, the sports utility vehicle Freemont being one of them.

In the first six months of 2011, Fiat was the worst performer among Europe’s top six auto makers in terms of sales. Combined sales of Fiat, Lancia and Alfa Romeo cars tumbled 13 percent and the auto maker’s share of the European Union market fell to 7.3 percent from 8.2 percent for the same period last year, according to figures from the European Automobile Manufacturers’ Association.

Even Mr. Formica’s troubled former employer, Toyota, did better than Fiat, with sales falling 8.2 percent. Fiat owns 53.5 percent of Chrysler on a fully diluted basis.

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Fiat-Chrysler CEO says he’ll stay on until at least 2015

TRAVERSE CITY – Chrysler and Fiat CEO Sergio Marchionne says electric vehicles are “overhyped” and that “plain-vanilla” technology is the key to meeting higher fuel efficiency standards.

At the Center for Automotive Research’s annual Management Briefing Seminars on Wednesday, Marchionne said he plans to stay on the job until at least 2015, and an initial public offering of Chrysler stock is unlikely before 2013 — later than has been speculated. His successor, Marchionne said, is likely to come from within the Fiat-Chrysler alliance, reported The Detroit News.

In a wide-ranging speech, and in comments to reporters afterward, Marchionne took generations of auto executives to task for opposing increases in federally mandated fuel efficiency standards, as well as other government-imposed requirements.

“This industry has got a very bad habit of crying wolf, and sooner or later somebody’s going to call your marker and call your bluff,” he said. Automakers, he noted, have long opposed mileage requirements, but ultimately they always complied.

Marchionne said a compromise deal between automakers and the Obama administration to boost 2017-25 fuel economy standards to 54.5 mpg — about double their current level — is “very doable.”

“Anybody who surrenders 14 years before the date and says, ‘I can’t get there’ ought not to be in business,” he said.

Even though Chrysler plans to unveil an EV Fiat 500 next year, Marchionne said the focus on electric vehicles is “overhyped.”
“It cannot be the only answer” to great gas mileage, he said.

The “plain-vanilla” technology of better engines and transmissions, he added, “will by themselves bring huge benefits.”
Environmentalists praised Marchionne’s candor.

“I welcome all truth-tellers,” said Dan Becker, director of the Safe Climate Campaign.

Marchionne, 59, said he hopes the Fiat-Chrysler alliance will be one of the five or six global players in the auto industry.

“It’s going to be up to the guy after me, I think — after 2015, hopefully. Maybe a year later,” he said at the event. “Chrysler will be here after me.”

Meeting with reporters later, Marchionne softened his comments: “I technically can go beyond 2015,” and will “leave later or earlier as the case may be. … I wouldn’t focus on the date. I would focus on the process.”

The new Fiat-Chrysler management team announced last week has 22 executives representing of nine nationalities. “It’s designed to be a proving ground,” Marchionne said.

The new leadership structure, he said, is intended “to ensure speed, clarity of direction and unity of purpose. When two enterprises integrate, they share everything: industrial resources and know-how, projects and targets, challenges and ambitions.”

Fiat, which owns a majority stake in Chrysler, is likely to replace some board members. “It is to be reasonably expected, without being traumatic.”

Marchionne expects 12.7 million cars and trucks to be sold in the U.S. this year, which puts his estimate on the lower side of automakers’ projections. “People are still very reluctant to make long-term commitments to hiring and to capital,” he said.

While Marchionne believes the industry is “out of the ditch,” he sees a gradual recovery in sales over the next three or four years, and doesn’t expect industry-wide sales in 2014 to be close to 15 million.

China, he said, is a looming challenge to the American automakers.

“China is the largest producer of cars in the world. They produce almost entirely for the enormous domestic market, but their future plans for the export market are significant,” Marchionne said.

“Even assuming China were to export only 10 percent of what it produces, the risk we face in our home markets is enormous. We cannot afford to be unprepared for the ascent of China, reassuring ourselves of our invincibility.”

While Chinese automakers have been promising to arrive in the U.S. for several years, Marchionne said, “They are coming. They have a right to be here.”

Fiat plans to have a plant running in China next year that can assemble 300,000 vehicles annually.

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Chrysler and Fiat Integrate Leadership

Sergio Marchionne, chief executive officer of Fiat SpA and Chrysler Group LLC, unveiled a single management team for the two companies Thursday and will personally lead the North American division of the newly united group.

The move effectively shifts the nexus of power to Auburn Hills, though Fiat-Chrysler’s formal headquarters will remain in Turin, Italy. The news comes a week after the Italian automaker bought out the U.S. and Canadian governments, which bailed out a bankrupt Chrysler in 2009, according to The Detroit News.

“Marchionne’s decision to keep the role of overseeing the business in North America shows that the center of gravity of the combined entity will be in the U.S.,” said Gianluca Spina, chairman of the business school at the Polytechnic University of Milan.

“The integration process is going extremely fast, as is Marchionne’s style.”

Fiat-Chrysler will now be led by a 22-member global executive council. The group’s operations will be divided into four global regions.

In assembling his leadership team, Marchionne said he was only interested in picking the most talented person for each position. But the group he selected is a balance of Americans and Europeans, Fiat executives and Chrysler managers.

Marchionne, 59, was himself born in Italy, raised in Canada and lives in Switzerland. He has a condo in Metro Detroit.
His team includes eight Italians, five Americans, two Germans, two Britons, a Brazilian, a Frenchman, a Canadian and a Swiss. Eleven of the executives currently work for Fiat, nine for Chrysler and one for CNH Global NV, which is part of Fiat Industrial SpA.

“These appointments are the result of an extensive process of evaluation of the technical and leadership skills of the individuals who have been appointed to the GEC. But equally important is the fact that they reflect the multicultural geographically diverse nature of our businesses,” Marchionne said.

“We recognize in these leaders the future of Fiat-Chrysler as an efficient, multinational competitor in a global automotive marketplace.”

Fiat’s approach is a sharp contrast to Daimler AG’s approach to working with Chrysler after it purchased the Auburn Hills automaker in 1998.

Most senior positions in DaimlerChrysler AG, as the combine was known, were held by Germans and major decisions were made in Stuttgart. American executives reported being excluded from important conversations when their counterparts shifted to German. Relations soon soured and the marriage fell apart in 2007, when Daimler sold Chrysler to the private equity firm Cerberus Capital Management LP.

Marchionne seems determined not to repeat that mistake. When one recently arrived executive started speaking to his boss in Italian in the elevator in Auburn Hills, Marchionne told him to speak English while in the presence of the other employees.

One of the most important positions on the new council, chief financial officer, went to Chrysler Group CFO Richard Palmer.

“The Daimler thing never worked,” said Jay Baron, chairman of the Center for Automotive Research in Ann Arbor. “This has been incredibly amicable.”

Fiat and Chrysler are better partners because they both are rebounding from financial crises and both compete in the lower half of the automobile market, he said. Neither company had a truly global reach until now.

Fiat Purchasing Chief Gianni Coda will run the group’s operations in Europe, Africa and the Middle East. Cledorvino Belini, the current head of Fiat’s Brazilian operations, will lead the South American division. Michael Manley, currently in charge of the Jeep brand, will head the Asian division.

Marchionne will remain CEO of both Fiat and Chrysler. The other regional chiefs will hold the title of chief operating officer for their respective business units. Other COOs include Pietro Gorlier, who will be in charge of parts, service and Mopar; Eugenio Razelli, who will head the components division and parts subsidiary Magneti Marelli SpA; and Riccardo Tarantini, who will lead the Teksid SpA and Comau SpA subsidiaries.

“We have now reached the right moment to step on the accelerator of the Fiat-Chrysler integration,” Marchionne said Thursday.

But a formal, legal merger is likely at least a year away, he said in a conference call earlier this week. That is because of an ongoing dispute with the United Auto Workers over the valuation of Chrysler.

Fiat was given control of the company in 2009 as part of a deal brokered by the Obama administration. A union-run retiree health care trust known as a voluntary employee beneficiary association, or VEBA, also received a stake in the new Chrysler. Fiat, which is now the only other shareholder in Chrysler, would like to buy out the UAW, but the two sides haven’t agreed on a price.

Marchionne said the solution is to take Chrysler public again, let the union sell its shares on the open market and allow Fiat to consolidate its control of the company. It already controls 53.5 percent of Chrysler and is on track to increase that to 58.5 percent by the end of the year.

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Fiat Boosts Chrysler Stake to Majority

Fiat SpA took a majority stake in Chrysler Group LLC when it completed the purchase of a 6 percent stake from the U.S. Treasury and a 1.5 percent holding from Canada that ended taxpayer ownership in the automaker.

Fiat, which paid $625 million for the holdings, increased its stake in Chrysler to 53.5 percent on a fully diluted basis, Chrysler said in a U.S. regulatory filing. Fiat also paid $75 million for governments’ right to buy the remaining stake held by the United Auto Workers union’s retiree health-care trust, of which $15 million goes to Canada, reported Bloomberg.

“With today’s closing, the U.S. government has exited its investment in Chrysler at least six years earlier than expected,” Timothy Massad, the Treasury Department’s acting assistant secretary for financial stability, said in a separate statement. Loans to Chrysler were set to mature in 2017.

Fiat consolidated Chrysler’s results from June 1, a sign of the rapid integration of the two carmakers since the Auburn Hills, Michigan-based manufacturer exited bankruptcy in June 2009. Fiat is scheduled to report its second-quarter earnings July 26, the first one to include Chrysler results.

Fiat, based in Turin, Italy, and Chrysler will have a single management structure soon, Sergio Marchionne, chief executive officer of both companies, said last week.

Marchionne, 59, is working on management changes as he moves to integrate the two companies. He plans to merge the carmakers to reduce costs and achieve a target of more than 100 billion euros ($140 billion) in combined revenue by 2014. The executive said in May that the timing of a merger hasn’t been decided, adding that a combination isn’t likely this year.

“With the business strategies of Fiat and Chrysler irrevocably linked, we believe a merger is a logical next step,” Stefan Burgstaller. a Goldman Sachs Group Inc. analyst wrote in a note to clients July 20.

Fiat, initially granted a 20 percent stake in Chrysler by the U.S. government, expects to hold 58.5 percent of the third- biggest U.S. automaker by the end of 2011, after getting 5 percent in return for developing a fuel-efficient car for Chrysler. The United Auto Workers union’s trust will have the remaining 41.5 percent of Chrysler at that time.

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Fiat, Chrysler to Have One Management Structure, Sergio Marchionne Says

Fiat SpA and Chrysler Group LLC will have a single management structure soon, Sergio Marchionne, chief executive officer of both companies, said today, as he takes another step toward merging the two carmakers.

Marchionne plans to announce a unified structure “in terms of leadership pretty quickly,” the executive told reporters in Zurich after a speech at the Swiss-American Chamber of Commerce. Marchionne, 59, declined to say whether the announcement would come along with Fiat’s quarterly earnings report July 26, reported Bloomberg.

Marchionne is working on management changes as he steps up the integration of the two companies. He plans to merge the carmakers to reduce costs and achieve a target of more than 100 billion euros ($140 billion) in combined revenue by 2014. The executive said in May that the timing of a merger hasn’t been decided yet, adding that a combination isn’t likely this year.

“No one is better than Marchionne at selling an auto story,” Societe Generale analyst Stephen Reitman wrote in a note to clients July 11. “The current stock price already discounts most of the good news to come from Chrysler and ignores much of the risk,” said Reitman, who cut his recommendation to “sell” from “buy.”

Fiat consolidated Chrysler’s results starting at the end of May, a sign of the rapid integration of the two carmakers since the Auburn Hills, Michigan-based manufacturer exited bankruptcy in June 2009.

Fiat, which was initially granted a 20 percent stake in Chrysler by the U.S. government, aims to hold 57 percent of the third-biggest U.S. automaker by the end of 2011. The United Auto Workers union’s trust will have 41.5 percent of Chrysler at that time, Fiat said.

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