Tag Archive | "Sergio Marchionne"

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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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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Ford follows GM’s lead in picking insider as CEO

Via The Detroit News

Ford Motor Co.’s decision to elevate Mark Fields to chief executive marks the second time since December that a U.S. automaker has tapped a company insider as its leader. The move leaves Sergio Marchionne, CEO of Fiat SpA and Chrysler Group LLC, as the longest-tenured head of a Detroit automaker.

In December, the General Motors Co. board named a veteran of more than 30 years, Mary Barra, to become CEO. For almost five years, the Detroit automaker had been run by two CEOs who came from outside the auto industry: former AT&T CEO Ed Whitacre, who had been appointed to GM’s board by the U.S. Treasury Department, and then another Treasury appointee, Dan Akerson, a partner at private equity firm Carlyle Group.

The 2006 hiring of Alan Mulally, a long-time Boeing executive to run Ford, marked a change for the U.S. auto industry that usually tapped industry veterans who rose through the ranks.

David Cole, chairman emeritus of the Center for Automotive Research, said Mulally “redefined the culture of Ford and got rid of the fiefdoms.” He predicted even after Mulally’s departure, the culture change would remain.

Coles said Mulally “came from a big, complex manufacturing company like Boeing” that had similar challenges.

He said Whitacre and Akerson didn’t have that kind of experience. “They were really very inexperienced in manufacturing,” Cole said. “Down the road, I think you could see another Mulally-type executive, but not an Akerson or Whitacre.”

When a majority stake in Chrysler LLC was sold by Daimer AG to Cerberus Capital Management LP, the New York-based private equity firm tapped former Home Depot CEO Robert Nardelli to run the company. When the Obama administration agreed to a new bailout of Chrysler in 2009, it forced a merger with Fiat SpA and gave control of Chrysler to the Italian automaker under Marchionne.

In January, Marchionne told reporters at the North American International Auto Show he planned to stay on for another three years. The CEO, a workaholic who has on occasion made three transatlantic flights in a single week, has discouraged speculation about when he will step down.

“Trying to second-guess when that is going to happen is a tremendous waste of time,” Marchionne told reporters in January, according to CNN. “Go buy a lottery ticket. You’ll have a lot more fun and the odds of you getting it right are greater.”

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Fiat Chrysler Maps Out Another 5 Years

Via The Detroit News

On Nov. 4, 2009, Sergio Marchionne took the stage at the Chrysler Technical Center in Auburn Hills to outline his vision for the born-again automaker.

The five-year plan Marchionne and his newly assembled executive team outlined at that daylong briefing for analysts and journalists offered an unprecedented view of the future plans of an American automaker, albeit one now controlled by an Italian company. It charted a course for the new Chrysler from the gates of history’s graveyard back to the top tier of the U.S. automobile market.

Marchionne promised big things for the company that Fiat had just acquired for nothing from an Obama administration eager to unload Chrysler to anyone willing to cover the electric bill: a return of the Fiat brand — and Fiat small car technology — to the United States, a rebirth of the Chrysler brand, even an electric vehicle to feed the administration’s appetite for green technology.

In four-and-a-half years, Marchionne and his team have accomplished most — but not all — of what they promised. They went above and beyond projections in some areas, including paying back the money they borrowed from the U.S. and Canadian governments six years ahead of schedule and buying the rest of Chrysler from a United Auto Workers-run trust on Jan. 1.

Now, on May 6, the management team will hold another daylong briefing in Auburn Hills to outline a new five-year plan, not just for Chrysler but for all of the brands of the newly constituted Fiat Chrysler Automobiles NV.

“They’ve made pretty good progress, considering where they came from,” said David Cole, chairman emeritus of the Center for Automotive Research in Ann Arbor. “The next step is to more fully integrate Fiat and Chrysler. They’re really in the middle of that right now.”

Before the 2009 briefing, many observers assumed Fiat had agreed to take up the burden of the bankrupt automaker simply to get control of its coveted Jeep brand. Others, including many financial analysts, worried that Chrysler’s liabilities would soon drag down a resurgent Fiat and promptly cut its credit rating.

Instead, Chrysler became the life raft that kept a struggling Fiat afloat as the European car market sunk to depths not seen in decades. And while Jeep has in fact become the spearhead of the company’s global growth strategy, Marchionne has made big investments in Chrysler, Dodge and Ram, too.

Marchionne made good on promises to share platform technology with Chrysler and bring an electric vehicle to market in the United States. A special “Aero” version of the Dodge Dart satisfied another key demand of the Obama administration: introducing a compact that got more than 40 miles to the gallon.

But other elements of the last five-year plan have been scrapped or delayed.

Alfa Romeo has yet to make the triumphant return to the United States that Marchionne promised four years ago. The Chrysler 200 and Jeep Cherokee were introduced later than scheduled, while plans to replace the Dodge Avenger, Jeep Compass and Jeep Patriot failed to materialize. So did the new Fiat-built Dodge and Chrysler subcompacts that were supposed to be in showrooms by now.

On the other hand, Chrysler has introduced substantially upgraded versions of the Jeep Grand Cherokee and Ram 1500 pickup that were not part of the product plan in 2009.

“This is going to have an effect on your balance sheet,” said Gualberto Ranieri, vice president of communications for the company. “There have been a number of changes to the plan, but the (overall) investment has been bigger than was originally intended.”

Since emerging from bankruptcy, Chrysler has announced investments of more than $5.2 billion and added more than 13,000 hourly employees.

That has been great news for communities such as Sterling Heights, where a Chrysler assembly plant originally slated to close in 2009 has instead become a state-of-the-art manufacturing facility building the all-new Chrysler 200.

And it has not just been hourly employees that have benefited from a resurgent Chrysler.

When Ranieri showed up for his first day of work at Chrysler’s Auburn Hills headquarters, there were just 7,500 men and women working in the largest office building in the United States after the Pentagon. Today, there are 14,000 — and that is not counting the hundreds of employees who have been moved off-site to other facilities in metropolitan Detroit, including Chrysler House: the company’s new satellite headquarters downtown.

The headcount is not the only thing going up at Chrysler, either. The company’s U.S. sales have risen for 48 consecutive months. That is partly due to a rebounding U.S. car and truck market, but Cole said it also is a testament to Chrysler’s improved quality and upgraded interiors.

“It’s day and night from Nov. 4, 2009,” Ranieri said. “That business plan was labeled as wishful thinking. The question was: ‘Are you going to die in 2010 or 2011?’ Nobody thought we were going to be alive in 2012. The news today is that Chrysler is kicking and alive, when five years ago it was labeled as dead.”

Cole said he thinks there may be more news to come as Marchionne pursues his overarching goal of turning Fiat and Chrysler into a global automotive powerhouse capable of moving 7 million vehicles annually.

“They may not have the economies of scale they may ultimately need for that,” Cole said. “It wouldn’t surprise me to see another partner drop into the game. I would guess that Sergio is keeping his eye open.”

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Marchionne’s Fiat Chrysler Plan Will Defy Global Rivals

Via Forbes

Investors in Fiat Chrysler Automobiles (FCA) might be confused about where the company really lives these days, but CEO Sergio Marchionne’s new five year plan next week is likely to leave nobody with any doubts about priorities as he marches the company towards matching and beating the competition.

When Fiat completed the merger with Chrysler earlier this year with the $4.35 billion buyout of the UAW’s stake, investors were in a spin about what nationality FCA actually was. Its shares will probably be listed in New York, it will be domiciled legally in the Netherlands, and pay tax as though it was British.

But Marchionne, who has said Fiat Chrysler must raise sales to between six and seven million a year to face down the likes of Toyota of Japan, General Motors, and Germany’s Volkswagen, won’t leave any room for doubt on May 6, as he demands Chrysler’s SUV maker Jeep, Fiat’s colorful Alfa Romeo and to a lesser extent upmarket Maserati lead the charge towards more sales and higher profits.

Last year, Fiat Chrysler sold about 4.4 million vehicles.

This won’t come cheap. Reviving Alfa Romeo alone will cost upwards of $7 billion. Some experts fear that simply raising output, without taking care to improve quality, won’t help profitability.

Stefano Aversa, co-president of industry consultants Alix Partners, said analysts concur that it will cost between three and five billion euros ($4.2 billion to $6.9 billion) to make Alfa Romeo an effective competitor in the premium sector against the likes of BMW, VW’s Audi and Mercedes.

Under a previous failed plan, Alfa Romeo was supposed to reach sales of 500,000 this year, with 85,000 in America. In fact Alfa Romeo made only 75,400 cars last year, down from 92,100 in 2012, according to Automotive Industry Data. Sales of Alfa Romeos will finally get under way later this year in the U.S. with small numbers of little, high-priced 4C sports cars.

Alfa Romeo has been a long-term money loser for Fiat, with losses of between $250 million and $500 million for the first 10 years of this century. Yet such is the perceived power of the Alfa Romeo brand that mighty Volkswagen has made no secret of its desire to buy the company. This is hard to believe when you consider Alfa Romeo’s distant sporting history has long been overtaken by models that were a nightmare of style over substance, exciting buyers with their fabulous looks, inspirational engine noises and driveability, but then disappointing with poor quality and plunging second hand values.

Aversa said products are likely to be at the forefront of the new plan that is about to be unveiled and will be the first for the new integrated FCA.

“Sergio Marchionne is likely to be much more centered on product and push forward premium vehicles from Alfa Romeo and Maserati, and I think he will continue to focus on the north American market with Chrysler doing well and on exploiting the brand Jeep globally.”

“On the emerging market side, Marchionne will certainly try to protect and leverage its leadership position in South America, which is still a market with unique opportunities, and to accelerate the development of China, which now seems to be on the right track, but still with a long way to go,” Aversa said.

Aversa describes India as an “unfulfilled promise” for most western manufacturers, including Fiat, but too important in the long term to skip.

Fiat is thought by some analysts to be dangerously over-borrowed, but Aversa doesn’t think it’s a big problem.

Any large manufacturer will need to make big investments on electrification, hybrids, aluminum and alternative materials to meet tough fuel consumption standards. For FCA, Aversa expects Marchionne to further leverage so-called mega platforms, which allow multiple vehicles to be made with the maximum amount of commonality and therefore reduce capital expenditures.

Aversa reckons Marchionne will announce plans for a new cheap car.

“I expect to see plans for a low-cost car. Almost all the big manufacturers are looking at this market segment. If done right it can be profitable and Fiat has the capabilities to address these low cost cars and make money,” he said.

International Strategy and Investment also expects Marchionne to give Jeep and Alfa a key role in the plan, and likes reports that suggest the plans for Alfa Romeo include it becoming a standalone entity, separately reporting its profits and sales.

“Indeed, the separation of Maserati has enabled the investment community to immediately recognize the brand’s progress, with revenues of 776 million euros ($1.1 billion) during the fourth quarter as shipments increased four times helping Maserati to a 10.3 per cent margin for the full year,” the investment bank said.

“Of course more important than reporting semantics next week will be the credibility of the plans for Alfa Romeo and Jeep themselves,” it said.

Some experts suggested that for FCA to make it big, it would also have to merge to create more volume and economies of scale. Companies like Mazda, Mitsubishi, Subaru, and Suzuki of Japan are said to be candidates. Even British based and India owned Jaguar Land Rover has been cited as a possible partner.

Others suggest that Fiat’s Ferrari supercar subsidiary might be on the auction block to cut debt.

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