Tag Archive | "Fiat"

Fiat’s Growth Plan Is Achievable, Marchionne Says


Via The Wall Street Journal:

The ambitious volume growth targets in Fiat Chrysler Automobiles NV’s five-year plan presented earlier this month are achievable, Chief Executive Sergio Marchionne said on Tuesday.

“I wouldn’t have put them down if they weren’t achievable,” Mr. Marchionne said at an event to commemorate the 10-year anniversary of the death of former Fiat Chairman Umberto Agnelli.

Earlier in May, the company’s top executives rolled out a five-year plan that projects big gains for a revamped Alfa Romeo sports-car brand, its Jeep sports-utility line and a repositioned Chrysler focused on mass-market sales. Fiat Chrysler aims to increase yearly vehicle sales by 60% to 7 million by 2018.

The relaunch of Alfa Romeo is the most challenging part of the plan, Mr. Marchionne said.

The CEO said that the financial targets he laid out for 2014 also are achievable.

He added he isn’t worried about the market’s negative reaction to the plan and he is convinced the stock will soon recoup losses sustained since the plan’s presentation on May 6. Fiat shares have lost 8.4% since the plan’s presentation.

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Fiat Chrysler Will be OK if it Misses Lofty Targets: Marchionne


Via Reuters

Fiat Chrysler Automobiles (FIA.MI) Chief Executive Officer Sergio Marchionne said the company will be much stronger than it is today at the end of his plan to sell 7 million cars by 2018, even if it misses the targets he set forth last week.

“The targets are the targets. But even if I miss it by 10 percent, from where I am today, it’s like (the) midget and the Jolly Green Giant,” Marchionne said at the dedication of a new transmission plant in Tipton, Indiana, on Tuesday.

His suggestion was that Fiat Chrysler would prosper, whether or not it falls a bit short of meeting some of his lofty goals.

The Green Giant, mentioned with a touch of humor by Marchionne, is the towering animated character with a deep “Ho, Ho, Ho!” long used to advertise a brand of canned and frozen vegetables produced by General Mills.

Last week Fiat shares fell 13.5 percent as Marchionne revealed a five-year plan that calls for the global sale of 7 million vehicles from 4.4 million in 2013 and a fivefold increase in net profit.

Many Wall Street analysts said they were concerned that Fiat Chrysler would be unable to meet the ambitious goals.

Marchionne said the targets were to spur his troops to greater heights after the first five-year plan, from 2009 to 2013, that righted a near-bankrupt company to one that will be introduced on the New York Stock Exchange late this year as the seventh-largest car company in the world.

“People think I do these plans for the benefit of the capital markets. That is the irrelevant portion of the pitch.

“The exercise of leadership requires the setting of some pretty bold objectives. The house needs direction. The plan is a structure that provides direction. So don’t quibble about whether I sell 400,000 Alfas or I sell 382,000.”

The company also plans to sell 150,000 Alfa Romeo cars in North America by 2018. It now sells no Alfa Romeo models in the United States or Canada.

Fiat shares fell 3 percent on Tuesday to 7.25 euros, but are up 22 percent since the start of the year and the announcement that Fiat had sealed a deal to buy out Chrysler’s minority owner.

JEEP PRODUCTION

Fiat Chrysler may expand Jeep production in United States by expanding existing plants, Marchionne also said.

“It may require the expansion of some of our sites. I can’t deal with the volumes at issue now.”

U.S. sales of Jeep, Fiat Chrysler’s SUV brand, increased 46.5 percent through April and existing Jeep plants in Toledo, Ohio and Detroit that make the profitable Wrangler and the Grand Cherokee are at production capacity.

“We’re looking at issue,” Marchionne said of getting more Jeep production in the United States.

Fiat Chrysler has plans to make Jeep at a plants in China and Brazil, but not in India, Marchionne said.

Globally, by 2018, Fiat Chrysler plans to produce 1.9 million Jeep models. It also targets sales of 1 million Jeeps this year, up from 732,000 in 2013.

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Chrysler Swings to a Loss on Charges


Via The Wall Street Journal

Chrysler Group LLC on Monday reported a $690 million loss for its first quarter on expenses related to a debt payment and a charge-to-earnings stemming from its purchase by Italy’s Fiat SpA in January.

The Auburn Hills, Mich., auto maker is owned by Fiat but still releases its profit and sales separately as a result of debt requirements. It posted a net profit of $166 million in the same year-ago period. Revenue for the quarter ended March 31 rose 23% to $19 billion, and world-wide sales were up 10% to 621,000 units.

Chrysler’s results come less than a week after newly renamed parent Fiat Chrysler Automobiles NV revealed an ambitious new five-year plan that aims to vastly expand the U.S. auto maker’s lineup and transform its iconic Jeep brand into a global player.

Its first-quarter performance was dragged down by $1.2 billion in charges, including a $504 million noncash loss on the payment of a note issued to a United Auto Workers union health-care trust. The company retired the note in February and issued new debt with a lower interest rate.

Chrysler also took a $672 million charge to fulfill commitments made to the UAW as part of a $4.35 billion deal Fiat struck in January with the union’s health-care trust to buy the 41.5% part of Chrysler it didn’t already own.

The charge reflects a total of four equal installment payments to be made each year to the union for support of manufacturing programs at Chrysler plants. The first payment was made in the first quarter.

Excluding the charges, Chrysler would have earned $486 million in the quarter.

Chrysler confirmed its guidance for the full year, including net income of between $2.3 billion and $2.5 billion, revenue of about $80 billion and world-wide shipments of about 2.8 million vehicles.

“We’re going to have a back loaded second half,” said Richard Palmer, Chrysler’s chief financial officer, citing the phased roll out this summer of a new Chrysler 200 midsize sedan.

The 200, Chrysler’s first all-new midsize car in years, began shipping about a week ago but it isn’t expected to hit showrooms in volume until the third quarter, he said.

The earnings report is Chrysler’s first since it was fully acquired by Fiat, creating the world’s seventh-largest auto maker.

Chief Executive Sergio Marchionne last week confirmed the newly-combined company would have its headquarters in London and its shares listed on the New York Stock Exchange later this year.

For the last couple of years, Chrysler has been driving profits for Fiat. Chrysler’s sales have risen sharply amid a rebounding U.S. auto market and popular new models like the Jeep Grand Cherokee.

The Italian auto maker earlier this month reported a loss of €319 million ($444 million) in the first three months of the year, compared with a net profit of €31 million a year earlier. The Fiat loss included one-time costs connected to the payoff of the UAW trust note and currency turmoil in Venezuela. Without those costs, Fiat said it would have earned €71 million.

Chrysler generated about $900 million in free cash flow for the first quarter but also paid a special $1.9 billion distribution payment in connection with Fiat’s acquisition deal.

At the end of March, it had $12.4 billion in cash, down from $13.3 billion at the end of 2013.

For 2014, the auto maker projects free cash flow of between $500 million and $1 billion, down from $2.1 billion last year.

Chrysler’s quarterly modified operating profit grew to $586 million, or 3.1% of net revenue, up 35% from the same year-ago period.

Last year, Chrysler reported a 65% drop in its first-quarter profit, the result of higher costs related to new-model rollouts and a drop in shipments as it idled certain plants to prepare for building new vehicles.

In all, Chrysler earned $2.8 billion in 2013, as sales increased with the arrival of a new Jeep Cherokee sport-utility vehicle and because of a $962 million noncash tax benefit booked in the fourth quarter.

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Marchionne Says London to Have Fiat Chrysler Headquarters


Via Bloomberg

Fiat Chrysler Automobiles NV, the company that will be formed from the combination of Fiat SpA and Chrysler Group LLC, will be based in London, marginalizing Italy’s role for the automaker.

While Fiat Chrysler had long planned to have a fiscal domicile in the U.K. for tax purposes, it hadn’t selected a specific city. The manufacturer’s presence in the British capital will also be more than just a postal address.

“The board, my office and some of my functions need to operate out of London,” Chief Executive Officer Sergio Marchionne said during a press conference yesterday in Auburn Hills, Michigan.

Fiat, Italy’s largest manufacturer, is reducing its reliance on its home country after buying full control of Chrysler in January. The Turin-based company will have its main stock listing in New York rather than Milan and will be registered in the Netherlands. While Marchionne hadn’t previously specified the city for the headquarters, he said in January that the U.S. had a “large claim” to the site.

Choosing London makes sense for a number of reasons, said John Wolkonowicz, an independent auto analyst. The city is a financial capital and centrally located among Fiat Chrysler’s far-flung operations. It also avoids potential fallout from choosing Chrysler’s base in Michigan over Turin, he said.

Turin Versus Detroit

“If you put it in Detroit, you make Fiat people feel bad, and if it’s in Turin, you make Chrysler people feel bad,” Wolkonowicz said. “This way it’s neutral ground.”

Fiat also stands to benefit from the U.K.’s corporate tax rate declining to 20 percent next year from 21 percent. Income from patents will eventually be as low as 10 percent, offering potential for additional relief. By comparison, Italy’s corporate rate is 31.4 percent.

By not picking Chrysler’s home, the U.S. government would lose out on corporate tax revenue after spending about $7.6 billion to bail out the country’s third-biggest carmaker. The U.K. headquarters would mean Chrysler joins U.S. companies such as Pfizer Inc. and Chiquita Brands International Inc. in contemplating moving corporate addresses abroad to lower bills.

Italy Plan

Fiat will maintain its manufacturing position in Italy with plans to expand production of upscale Maserati and Alfa Romeo cars in its historical home. Marchionne has vowed to keep factories open there, taking the sting out of no longer being the base for the company.

“It doesn’t matter where Marchionne decides to base his office and company’s headquarters since we are interested in him making investments in Italy,” Ferdinando Uliano, head of the Fim Cisl metalworkers union, said in a phone interview today. “Fiat’s business plan is good for Italy and ensures full employment. For now, that’s it.”

Boosting production in Italy is part of Fiat Chrysler’s 55 billion-euro ($76 billion) plan to more than double profit and increase annual deliveries 61 percent over the next five years. Marchionne has personally put his money behind the strategy by buying 130,000 shares for nearly 1 million euros.

The purchase came as investors sold the stock, leading to the biggest drop in more than 2 1/2 years on May 7, because of skepticism that the CEO will be able to meet the 2018 targets. Marchionne said Fiat investors “overreacted.”

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Fiat Swings to Loss


Via The Wall Street Journal

Fiat SpA, the parent of Chrysler Group LLC, reported a loss in its first quarter on the same day its chief executive and top managers unveiled an ambitious five-year plan that proposes to boost vehicle deliveries 60% by 2018.

The plan for Fiat Chrysler Automobiles NV, the Italian-U.S. merger now awaiting Fiat shareholder approval, ultimately is to boost world-wide sales to 7 million by 2018, up from 4.4 million last year.

Sergio Marchionne, the combined company’s CEO, has long said that a mass-market car producer can only survive in the cut-throat industry if it sells at least 6 million vehicles a year. Mr. Marchionne engineered Fiat’s takeover of Chrysler and is considered by many to be the consummate deal maker, but he has fallen short of ambitious sales targets in the past.

Fiat Group lost €319 million ($444 million) in the first three months of the year, swinging from a net profit of €31 million for the same period last year. The loss included one-time costs connected to Fiat’s payoff of a note held by a United Auto Workers union healthcare trust, and currency turmoil in Venezuela. Without those costs, Fiat said it would have earned €71 million. The group lost money on its mass-market brands in the Americas and in Europe, while it made money in Asia Pacific and worldwide on its luxury brands.

Net revenue rose 12% to €22.1 billion, bolstered by gains in North America and Asia as well as improved sales of the company’s Ferrari and Maserati luxury brands. Net industrial debt, which excludes the effects of the buyout of Chrysler in early January, was €10 billion at the end of March, €300 million more than at the end of 2013.

The company confirmed its 2014 full year forecast for sales and profit. Earlier this year Mr. Marchionne said trading profit, which strips out interest, taxes and one-time items, would be between €3.6 billion and €4.0 billion on revenue of around €93 billion.

Underlining the challenging competition it faces, Fiat’s results came the same day Daimler AG reported April car sales rose 13% on rising demand in the U.S., China and Europe. Last week, Daimler said first-quarter net profit almost doubled to €1.03 billion. On Tuesday, BMW AG also said first-quarter net profit rose 11% to €1.46 billion.

The plan for Fiat Chrysler presented Tuesday during the all-day presentation at Chrysler headquarters outside of Detroit bets on a large jump in the sales of the Alfa Romeo brand, the Jeep sport-utility line and a Chrysler brand that is being repositioned as a high-volume, mass-market competitor. Sales in China are forecast to surge 262% to 850,000 vehicles while North American sales rise 48%.

The company is planning to sell bonds to finance the group’s turnaround plan and is also going to refinance existing debt. Mr. Marchionne ruled out an IPO of Ferrari, a move that could have raised much needed cash.

Fiat Chrysler will move its primary listing to New York later this year and keep a secondary listing in Milan. The company will be registered in the Netherlands and have its tax domicile in Britain, cementing a politically sensitive shift away from Italy, Fiat’s home for the last 115 years.

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Fiat Chrysler Debuts New Logo, Big 5-year Plan Today


Via Detroit Free Press

Most automakers have shed brands, but Fiat and Chrysler are showering American consumers with nearly as many choices as Procter & Gamble, even as Jeep and Ram trucks remain the engines of its North American profits.

As the automaker’s leaders outline their next five-year plan today in Auburn Hills, they may spark as many questions as they answer. Will consumers, who are already migrating to pickups, midsize and small crossover utility vehicles, embrace cars from Alfa Romeo, a brand that evacuated the U.S. before the dotcom bubble inflated?

How many new models will the flagship Chrysler brand get by the end of the decade? Can Dodge grow by appealing primarily to boy racers?

And that’s without mentioning the plans for Maserati and Ferrari.

“I would like to really know how they are going to manage a stable of six or seven key brands with none of them as a full-line brand, or carrying a full offering,” said Stephanie Brinley, automotive analyst for IHS Automotive. “It makes for a very chaotic and noncohesive range for consumers.”

CEO Sergio Marchionne’s team has earned credibility. Five years after bankruptcy, they have paid off loans, gained U.S. market share and generated profits robust enough to subsidize Fiat’s struggling operations in Europe.

But Chrysler is thriving on a lopsided, but profitable mix of pickups, SUVs and vans. Known by industry insiders as light trucks, those combined segments accounted for 78% of Chrysler’s sales in April. The promise that Fiat’s small car expertise would cure the glaring weakness in Chrysler’s lineup is largely unrealized.

The new Chrysler 200 sedan could change that. The completely re-engineered midsize car is expected to beat the combined sales of the model it replaces and the discontinued Dodge Avenger.

Meanwhile, the Chrysler brand has just three models — the 200, the 300 and the Town & Country minivan — and analysts question whether the company still needs its Dodge brand, which celebrates its centennial this year.

Today, Marchionne will finally say whether Dodge or Chrysler gets the next generation minivan, and provide more details about the crossover-type model the other brand will offer.

There will be an update of Alfa Romeo’s U.S. return, and more ambitious goals for Jeep in China.

“They have done exactly the opposite of what Ford and General Motors have done,” said Michelle Krebs, an independent auto analyst. “Is that the right direction to go? You have to define them carefully; you have to feed them with product. You have to support them with marketing dollars.”

In its turnaround, Ford, for example, sold Volvo, Aston Martin, Jaguar, Land Rover, a stake in Mazda and ended Mercury to get down to CEO Alan Mulally’s “One Ford,” global strategy.

General Motors — once proudly known for offering “a car for every purse and purpose” — has shrunk from eight to four brands, but still offers a comprehensive portfolio of vehicles.

More focus needed

Among global automakers, only Volkswagen has as more brands than Fiat Chrysler, ranging from ultra-luxury Porsche, Bugatti, Lamborghini and Bentley, to Audi, Volkswagen, Spanish-based SEAT and Skoda in eastern Europe.

“There are a number of consumer goods makers that have multiple brands under one roof,” said Reid Bigland, who doubles as CEO of Ram trucks and Chrysler’s head of U.S. sales.

Bigland argues that some competitors that start with subcompact cars and extend all the way to heavy duty pickups can become bloated and hard to define.

“We believe at Fiat Chrysler that a single brand cannot be all things to all people,” Bigland said. “It’s pretty clear that Ferrari is Ferrari — and Ferrari is not going to get into the minivan business.”

Fiat and Chrysler prefer to offer brands with a clear personality and identity.

Dodge, for example, is a performance brand that stands on its muscle car roots. Jeep is an SUV brand with off-road capability. Ram offers pickups and commercial vehicles. Maserati and Alfa Romeo offer Italian sports car and luxury performance.

“When you look at Fiat Chrysler, you need to look at its sum, and all of our brands contribute to our sales success and our profitability,” Bigland said.

Fiat Chrysler’s strategy has advantages and disadvantages, said Andrew Martschenko, senior director of strategy for Interbrand, an advertising and marketing consultant.

“It most certainly gives you more flexibility if you have more brands,” Martschenko said. “The challenge is can you support those brands with enough products?”

Budget constraints

Mike Manley, CEO of Jeep and head of Fiat Chrysler’s international operations, said the product development budget can support each brand.

“Jeep has been lucky enough to be given the resources to really get the things that it needs to continue its growth story for many years,” Manley said.

But budget constraints have delayed Alfa Romeo’s re-introduction to the U.S. as well as the new minivan.

And even though Chrysler has delivered on most objectives of the 2009 five-year plan, it remains an also-ran in passenger car segments. The Dodge Dart, introduced in 2012 with an Alfa Romeo platform, was the company’s first new compact car in years.

Larger, heavier and pricier than the old Dodge Neon, its weight leaves it feeling underpowered. Dart sales didn’t meet expectations in 2013 and declined 28% through the first four months of this year.

In search of nameplates

Now, Chrysler is introducing an all-new 200 midsize sedan with high hopes. but with just three nameplates the Chrysler brand sells fewer vehicles in the U.S. than Hyundai, Kia, Subaru and Volkswagen.

“If you combine the 200 and Avenger volume today, you would say ‘OK, we have a little over 6% share of the midsize car segment,’ ” Chrysler brand CEO Al Gardner said. “Our goal is to do that and then some. If not, why build it?”

Meanwhile, Dodge might lose its Caravan minivan, already lost the halo effect of the Viper super car when it was reallocated to the new SRT performance brand last year, and is losing the Avenger now.

Even with fewer models, Tim Kuniskis, Dodge CEO, said the brand has a stronger identity now than just a few years ago, largely based on the muscle car image of the Charger and Challenger.

Asked what additional cars he would like to have in the Dodge lineup, Kuniskis responded, “May 6” — an indication that there will be surprises coming today.

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