Tag Archive | "Sergio Marchionne"

Sergio’s Challenge: Build Jeep Into FCA’s Top Global Brand By 2018


Auto analysts are skeptical that Sergio Marchionne, the hyperbolic chief executive of Fiat Chrysler Automobiles, can meet his most ambitious goal: to nearly double Jeep’s global sales over the next four years, reported Reuters.

Marchionne reiterated his aggressive target for boosting Jeep’s annual volume to 1.9 million, while pacing the floor of the New York Stock Exchange on Monday during the newly merged company’s first day of trading.

That’s nearly 700,000 vehicles more than the average of analysts surveyed Tuesday by Reuters, who believe FCA is more likely to boost Jeep volume to just over 1.2 million by 2018, from a projected 1 million this year.

“I have all the best intentions” of hitting the 1.9 million mark, Marchionne said in an interview Monday with Bloomberg TV. “We may even blow through it.”

Counters longtime auto analyst and consultant Maryann Keller: “Realistically, he’s not going to make the numbers.”

Even if Jeep realizes only the more modest growth projected by analysts, it still is likely to emerge as the company’s largest brand, accounting for 25 percent or more of total volume. Marchionne is expecting FCA sales to reach 7 million by 2018; analysts are expecting 5.1 million.

The success of FCA’s Jeep growth strategy hinges not on a huge expansion of the brand’s product portfolio, but rather on an expansion of its manufacturing and sales presence outside North America, Jeep’s traditional stronghold since its post-World War II metamorphosis from military to civilian use.

FCA currently builds five Jeep models in four U.S. plants and is just adding a sixth model, the Jeep Renegade subcompact, in Italy. The Renegade is slated to go on sale in North America early next year.

Four years from now, the plan is to build six models in six countries. That includes two plants in China that are scheduled to open in 2015 and 2016, with a combined annual production capacity of 500,000, or roughly one-quarter of Jeep’s projected global volume.

Future Jeep models include only one other addition to the portfolio: A luxurious seven-passenger flagship in late 2018 that will revive the Grand Wagoneer name.

The Compass and Patriot compacts will be replaced by a single model in 2016, with redesigns of the Grand Cherokee and the Wrangler slated for 2017 and 2018, respectively.

Barclays Capital expects Jeep sales to reach 1.4 million by 2018. Whether Marchionne can hit the higher target depends “less on flooding the U.S. market with more Jeeps and more with taking an iconic brand global,” Barclays analyst Brian Johnson said in an interview on Tuesday.

While FCA expects to increase Jeep sales in Europe and Latin America, the real prize remains China, where the company continues to lag behind most of the major multinational automakers. Marchionne wants to leverage projected double-digit growth in SUV demand among Chinese consumers.

The brand’s re-entry into China “will provide Fiat with a turbo boost” to growth in that market, said Richard Hilgert, an analyst at research firm Morningstar.

Marchionne agrees that “our big future” is in China.

But FCA and Jeep “aren’t the only ones trying to grow” outside North America, said Jeff Schuster, senior vice president of forecasting at LMC Automotive, which expects global Jeep volume to reach 1.2 million in 2018.

Considering the swarm of new competitors coming, especially in the compact SUV segment, Schuster described Marchionne’s target for Jeep as “unrealistic” and “a very, very difficult road.”

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Fiat Chrysler Crowns Merger With Wall Street Debut


Fiat Chrysler Automobiles (FCA) makes its Wall Street debut to great fanfare on Monday, shifting the carmaker’s center of gravity away from Italy and capping a decade of canny dealmaking and tough restructuring by CEO Sergio Marchionne, reported Reuters.

The world’s seventh-largest auto group has sought the U.S. listing to help to establish itself as a leading global player through access to the world’s biggest equity market and the cheaper, more reliable source of funding it ultimately offers.

But Marchionne has picked a difficult moment to woo U.S. investors. The American auto industry is nearing its peak, the European market’s recovery from years of decline is proving elusive and weakness persists in Latin America.

Few, however, would question his business credentials. Marchionne and FCA Chairman John Elkann will ring the closing bell at the New York Stock Exchange on Monday to mark the milestone for the 62-year-old chief executive who has revived one of Italy’s top companies and helped to rescue Chrysler from bankruptcy along the way.

“Half of our car volumes are in the United States. I want this to be a U.S.-listed company,” Marchionne has said, having deliberately chosen to list on the day that celebrates Christopher Columbus’s arrival in America.

Fiat took management control of Chrysler in 2009 after the American carmaker emerged from government-sponsored bankruptcy and completed its buyout of the company this year. It is now combining all of its businesses under Dutch-registered FCA, which will have a British financial domicile and small London headquarters, with operations centers in Turin and Detroit.

AMBITIOUS AGENDA

Wall Street is the first item on an ambitious agenda for the next five years as Marchionne gears up for the launch of dozens of new models, from funky Fiat 500s to sporty Maseratis.

The target is a 60 percent sales boost to seven million vehicles and a fivefold increase in net profit to as much as 5.5 billion euros ($6.9 billion) by 2018 – the year Marchionne has said he would step down as CEO after seeing through his investment plan.

FCA’s growth plans won’t come cheap, though, and Marchionne will need to be at his persuasive best if analysts are right with predictions that the group will need to raise more capital.

“It’s not the right time to list an auto stock anywhere,” said Arndt Ellinghorst, a London-based analyst with ISI Group. “This is happening in the middle of a major profit warning from Ford and people are still very concerned about GM. It’s going to be tough for Marchionne to convince investors.”

Ford has hacked back its profit forecast for this year, citing recall costs in North America and steeper losses in Russia and South America.

Marchionne maintains that FCA should not be tied to Ford’s woes, saying that its strong position in Brazil gives it an advantage over competitors, and this month reiterated full-year guidance despite market expectations of a cut to forecasts.

DETROIT POWER STRUGGLE

Using the other two Detroit giants GM and Ford as a benchmark, FCA is seen as the least attractive because of its aging model line-up, high debt, weaker margins in North America and its minimal presence in China.

“Ford and GM also offer much stronger cash generation and balance sheets, and are thus in a position to return cash to shareholders, while FCA still needs to raise capital,” Exane BNP Paribas analyst Stuart Pearson said in a note.

FCA will decide on future financing options this month, though Marchionne insists it does not need a capital increase.

The group has a stronger premium brand portfolio than either Ford or GM, with an attractive carrot for investors in the form of luxury brands Ferrari and Maserati, the promise of a relaunched Alfa Romeo marque and Jeep.

“We see FCA’s Asia weakness as a huge upside opportunity because with Jeep they have the right product for Asia,” Barclays analyst Kristina Church said.

Monday’s listing is seen as a purely mechanical exercise, one U.S. investment banker said, adding that the true test will come once FCA seeks to access U.S. capital markets. “Now would be the worst possible time to ask investors for money,” he said.

Marchionne, meanwhile, has a clear criterion for Wall Street success: more than half of the merged company’s shares changing hands in New York instead of Milan.

American investors said that appetite will take time to build, especially as FCA has yet to switch to United States accounting principles and to reporting results in dollars.

LOST IN TRANSLATION?

“You have an Italian company buying out a U.S. one, but the holding is registered in Amsterdam with an HQ in London – that’s a lot to get your head around, and without a (pre-listing) roadshow they are not doing themselves a favor,” a second U.S. banker said.

Marchionne will hit the road next month to spread the word and has said that FCA could also sell treasury shares and other stock after the listing in an attempt to boost trading volumes.

He believes that FCA’s cause will be aided by Chrysler’s brand strength in the United States, now the main profit center for the combined group. FCA sold more cars in North America last month than Toyota, the world’s largest automaker.

“Given where Chrysler was five years ago, that achievement gives us some satisfaction,” Marchionne said at the Paris auto show. “I believe the stock will interest American investors.”

The stock opens at 0930 ET in New York and shortly afterwards in Milan, where the group will keep a secondary listing. Monday’s opening price will be benchmarked against Fiat’s previous close of 6.94 euros ($8.76).

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Fiat, Chrysler CEO Sergio Marchionne ‘Done’ After 2018


Sergio Marchionne, CEO of Fiat SpA and Chrysler Group LLC, plans to step down at the end of 2018 after completing a five-year turnaround plan for the new Fiat Chrysler Automobiles NV, reported The Detroit News.

Marchionne, 62, told Bloomberg Businessweek that he will “undoubtedly do something else” after the plan, outlined earlier this year, has run its course.

“I am not going to do any more turnarounds,” he told the weekly business magazine. “I’m done; let some of the young punks do it.”

When presenting the new five-year business plan on May 6, Marchionne said he would remain the CEO through at least 2018.

Since taking control of Fiat in 2004, Marchionne is credited with resurrecting the Italian automaker and orchestrating the complete acquisition and turnaround of Chrysler that led to the creation of Fiat Chrysler Automobiles, which is expected to come to fruition Sunday.

FCA was announced by Marchionne in January following Chrysler becoming a wholly-owned subsidiary of Fiat after a $4.35 billion deal with the United Auto Workers union trust fund that pays health care bills for retirees, which owned a minority stake in Chrysler following the auto bailout.

FCA common shares, as previously announced by Marchionne, are also expected to begin trading on the New York Stock Exchange and the Italian stock market on Monday.

Marchionne, known for his off-the-cuff comments, is the longest-serving CEO of any major European or American automaker.

An heir apparent is not obvious for Marchionne, who came to Fiat as an automotive outsider.

In May, Fiat Chairman John Elkann said a succession plan had been discussed, but was “not a topic” at the time.

Elkann, according to Bloomberg Businessweek, has previously mentioned executives who could eventually replace Marchionne: CNH Industrial CEO Richard Tobin; Jeep CEO and President Mike Manley; Alfredo Altavilla, Fiat’s COO for Europe, Africa and Middle East and head of business development; and Cledorvino Belini, head of Fiat in Brazil.

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Marchionne Upbeat on Landmark Fiat Chrysler Listing


With the landmark listing of Fiat Chrysler Automobiles less than two weeks away, CEO Sergio Marchionne has a clear criterion for success: more than half of the merged company’s shares changing hands in New York instead of Milan, reported Reuters.

“If we do more volumes in New York than we do in Milan, that’s a good benchmark,” Marchionne said in an interview at the Paris auto show, adding that current Milan trading volumes often top 10 million share transactions.

“If that number were to go 6 million in the U.S. and 4 million in Europe I’d be happy,” he told Reuters.That outcome would also be distinctly different from what occurred after Chrysler’s 1998 acquisition by Daimler (DAIGn.DE), in which trading in DaimlerChrysler shares was heavily weighted toward Germany. That ill-fated deal collapsed a decade later amid a destructive clash of two corporate and national cultures that Fiat and Chrysler have managed to avoid.

Fiat took management control of Chrysler in 2009 after the American company emerged from government-sponsored bankruptcy. Earlier this year it completed its purchase of all outstanding Chrysler shares, and the listing of the new Fiat Chrysler is scheduled for Oct. 13.

With a small corporate headquarters in London, incorporation in the Netherlands and major operating centers in Turin and Detroit, Fiat Chrysler aims to be the first successful automaker combining multinational roots with international reach.

The new primary listing on the New York Stock Exchange opens access to the world’s biggest and most liquid equity market and the cheaper, more reliable source of funding it ultimately offers.

“When you look at carmakers in the U.S. there will be three choices: you either go GM, you go Ford or you go FCA,” the CEO said.

TEN YEARS IN CHARGE

The listing follows another milestone — Marchionne’s 10th anniversary at Fiat, where he took over as CEO in mid-2004 as the Italian carmaker was itself teetering near bankruptcy. “My first Fiat auto show was the Paris show in 2004,” said Marchionne. “We’ve come a long, long way in 10 years.”

Indeed, many auto-industry observers doubted his ability to revive Fiat and were even more skeptical of his chances of rescuing Chrysler in 2009. But now the company is solidly profitable, albeit heavily indebted, and its brands include Fiat, Jeep, Chrysler, Dodge, Alfa Romeo, Maserati and Ferrari.

Soon after the listing, Fiat Chrysler intends to float shares it currently holds in itself and new stock to offset part of a 464 million euro buyback from existing investors – together worth “in excess of half a billion euros”, Marchionne said.

In an unusual move, he won’t be doing the traditional “road show” for prospective investors before the share listing. Marchionne said he doesn’t have much new to add after a daylong investors presentation in May, in which he laid out a five-year plan so ambitious that Fiat shares plunged nearly 12 percent the next day, causing trading to be suspended temporarily in Milan for excessive volatility.

But Marchionne continues to stand by those aggressive 2018 sales and performance targets, including a 60 percent increase in sales to 7 million vehicles, the elimination of industrial net debt that reached 9.7 billion euros at the end of June and the relaunch of Alfa Romeo as a global premium brand.

Fiat’s earlier turnaround defied the doubters and “nobody believed the 2009 plan at Chrysler, but we delivered all the numbers,” he said.”Extend the same benefit of the doubt to this plan as you did to the others.”

After heavy investment in 2014-15, Marchionne added, “in 2016 the machine turns and starts spitting out cash.” The company projects net income between 1.9 billion and 2.5 billion euros by then, about triple the projected earnings for this year.

A prime target for investment is Jeep, which the company will start building in new factories in both Brazil and China during 2015. The company is also developing a new version of its bread-and-butter minivan to be built in North America late next year.

Marchionne has been coy about whether Fiat Chrysler will raise new capital to fund its ambitious investments, but he gave strong hints during the interview that he hopes to avoid that.

“I’ve taken the view that a rational economic agent would not raise capital,” he said, while declining to discuss his likely recommendation to an Oct. 29 board meeting.

“Doing nothing is an option – we’re sitting on 20 billion euros of cash,” Marchionne said. Fiat Chrysler has total debt of 32 billion euros.

FERRARI BRAND

One of Marchionne’s prime goals is increasing the value investors put on the iconic Ferrari brand. Marchionne has ruled out a Ferrari sale or partial share listing for the near future, but he is less categorical about longer-term — describing the sportscar maker as a “phenomenal carrot” to investors.

Ferrari is “one of the biggest repositories of value inside Fiat which is yet unexpressed,” he said on Friday. “Optionality in all things is worth tons … whether it be a listing, a trade sale or the continuation of the asset inside FCA.”

Marchionne said Ferrari should be valued by investors at 7-10 billion euros, roughly the same as the entire group’s current 9.2 billion market capitalization. Analysts have put the value closer to half that amount.

Boosting Ferrari production beyond the current 7,000 cars a year is possible, Marchionne said, while vowing to proceed cautiously. Going too far, too fast would risk impairing the value of used Ferraris, he explained, which many owners use to trade up to buy new ones.

As for the Paris show itself, Marchionne said the paucity of exciting new cars on display reflected the current condition of the European auto industry and market.

“The best I can say about Europe is that it’s found its bottom,” he said. “I don’t think it’s going to get worse than this but I’m not sure it’s going to get much better.”

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Fiat Chrysler CEO Sticks to 2014 Guidance


Fiat Chrysler CEO Sergio Marchionne said on Thursday he saw no reason at present to review the carmaker’s 2014 financial guidance despite tough European and Latin American markets, reported Reuters.

After Fiat’s poor second-quarter results, analysts were widely expecting a cut in full-year guidance. For 2014, the auto group expects to raise operating profit, excluding one-off items, by as much as 14 percent.

“I have no (basis for) … suggesting I won’t (meet guidance),” Marchionne told reporters during an event in Balocco, northern Italy, adding that Fiat traditionally only reviewed its guidance once the third quarter was over.

“Europe is what it is, Latin America is having a rough patch. We are holding our own in Latin America. We do have a structural advantage on our competitors in Brazil because of our cost structure,” he said.

Marchionne said the third quarter should go well: “We are waiting for results for September, which is an important month. In America we are doing well.”

He reiterated the group had enough resources to fund its ambitious 5-year business plan and that a decision on any future capital raising will be taken in late October by the new board of recently merged Fiat Chrysler Automobiles N.V. (FCA) – formed after Italy’s Fiat took full control of its U.S. arm Chrysler.

FCA is due to list on Wall Street on Oct 13. The company has also submitted a request to list on the Italian bourse.

Ratings agency Fitch on Thursday raised its outlook on the carmaker to ‘stable’ from ‘negative’ and confirmed Fiat’s ratings, saying the group’s profile had “strengthened, due to the increased integration of Chrysler into Fiat”.

“We expect integration to deepen further and to provide more synergies in the medium-term,” it said.

Fitch said it expected Fiat to refinance Chrysler’s debt in 2016, which would give it unrestricted access to capital resources of the U.S. unit and help finance its growth plans.

MORE FERRARIS

Marchionne is due to become the chairman of Ferrari after Luca Cordero di Montezemolo resigned on Wednesday after 23 years at the helm of the luxury carmaker. The resignation followed clashes over strategy and Formula One results with Marchionne.

Montezemolo has wanted to keep Ferrari independent, while Marchionne has pushed to better integrate the business within Fiat to boost the group’s move into the premium end of the car market as it seeks to rival the likes of Volkswagen (VOWG_p.DE) and BMW (BMWG.DE).

“People should not underestimate the importance of Ferrari to the (Fiat) group. It is a big piece of what we are,” Marchionne said on Thursday.

He repeated that sales of Ferraris, currently capped at 7,000 vehicles a year to preserve exclusivity, could be raised gradually to keep up with demand from the super rich or the company would otherwise run the risk that “people will get tired of waiting … and will go buy something else”.

Despite a cap on sales, Ferrari’s first-half revenues rose 14.5 percent to 1.35 billion euros ($1.75 billion), while net profit rose nearly 10 percent. Ferrari deliveries are expected to increase by 5 percent this year, it said.

Marchionne has repeatedly excluded an initial public offering for Ferrari, but he said on Thursday the luxury carmaker was not crucial to FCA in the long term.

“Do I think that they are essential to the configuration of FCA forever? The answer is no,” he said. “But they represent what I consider to be the best of what a carmaker can be.”

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Fiat-Chrysler Sees New York Stock Market Listing on October 13


Fiat-Chrysler aims to list shares in the newly merged carmaker in New York on Oct. 13, Chief Executive Sergio Marchionne said on Saturday, adding that a decision on any capital increase would be made at the end of that month, reported Reuters.

He was speaking a day after the merger between Fiat and its U.S unit Chrysler cleared its last remaining hurdle.

Fiat bought out Chrysler at the start of 2014 and both operate as one firm. Marchionne wants to incorporate the two into Dutch-registered entity Fiat Chrysler Automobiles (FCA), paving the way for the U.S. listing he says is needed to help finance a 48-billion euro ($64 billion) five-year growth plan.

“The most likely date for the listing in the U.S. is October 13,” he told reporters on the sidelines of a meeting in Rimini.

Marchionne is counting on the merger and the listing to help pay for a relaunch of its Alfa Romeo and Maserati brands, export Jeeps globally, and take all three to fast-growing Asian markets, where the group is currently weak.

Marchionne said the five-year business plan for the world’s No. 7 auto group presented in May did not envisage a cash call.

“But all decision on any capital increase will be taken by the board of FCA at the end of October,” he said. He also confirmed the group’s full-year guidance for 2014, adding the U.S. market was going “incredibly well.”

Targets to grow net profit five-fold and sales by 60 percent within five years look ambitious, some analysts say, arguing that the company will have to raise capital to achieve them.

Fiat had 18.5 billion euros of cash at end-June, but almost 32 billion in debt. Its financing costs are high and margins are weakening.

Fiat had so far ruled out asset sales and a share issue, but may go for a mandatory convertible bond. Marchionne had previously said any decision on financing would only be taken after FCA was created.

The merger plan could have failed if the carmaker had been asked to pay more than 500 million euros ($658 million) to dissenting investors who tendered their shares, exercising a legal right triggered by Fiat’s decision to move its registered offices away from Italy.

Fiat said on Friday it was finishing a count of shares for which cash exit rights had been validly exercised, but it could already say that the 500 million euro limit would not be exceeded, based on data calculated so far.

It plans to publish the final count by Sept. 4.

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