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FCA Spinning off 10% shares in Ferrari

Discussion in 'Fiat Global News' started by pra.agar, Oct 30, 2014.

  1. prabhjot

    prabhjot Esperto

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    delhi ncr
    Marchionne has explicitly stated at the ongoing Geneva motor show that FCA is seriously looking at a merger/acquisition. He also slight-hinted that it might not be Mazda, and has in the past repeatedly stated that an M&A with a strong Europe or America-centric player (like VW or Ford or GM) does not serve the rationale of market expansion/cost sharing/risk-diversification behind his conviction that the Industry is too fragmented and needs considerable consolidation in one form or the other.

    And so most analysts (who are often no better than gossip-mongers!) are betting on.....Suzuki being the likeliest candidate, though a few are advocating a merger with Tata Motors-as-a-whole! Mitsubishi also gets mentioned, it being, like Suzuki and Tata, a longstanding small project/JV-type partner over many years.

    We'll know within the next 12 months, I think. Am 'betting' on Suzuki myself! :cool: A menage-a-trois with Tata in India....?;)
    jackharrisw likes this.
  2. prabhjot

    prabhjot Esperto

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    delhi ncr
    Automotive News, a VERY serious and highly respected industry website, as well as Reuters and Bloomberg, report based on investment banking sources that Marchionne, FCA and Elkann/Agnelli/Exor are very very seriously exploring several options for a BIG, MEGA merger before Marchionne retires in 2018: preferably with GM. A banker is quoted as saying FCA are busy and actively looking at all sorts of different merger and acquisition possibilities, small and BIG.

    Meanwhile, John Elkan/Agnelli has been quoted a few days ago as saying to EXOR shareholders and the business press that consolidation based on reason and common sense rather than an emergency is essential for the industry, i.e., starting with FCA itself. And that mergers (for which Marchionne and He are so justly known and celebrated) need to be highly respectful of 'cultural differences'.

    There's stuff brewing, maybe coming to a boil? Am still betting on a major share-swap/merger/strategic tie-up between FCA and Suzuki, and/or Tata Motors (including JLR), rather than a megalo-deal eg like with GM or Ford or VW.

    Although: there are many FCA fans and observers who fear that Marchionne and the Agnelli-s/Elkann-s/EXOR will just prefer selling out one or more of their glorious brands, esp the American ones (Ram? Chrysler? Dodge?) or maybe even Alfa Romeo, if they get a very good price.

    Are they that short-term-minded? The Agnelli-s/EXOR are like the Tata-s, they have an old business-family style long-term horizon, mefeels. And the FCA shares are outperforming all auto-industry comers. EXOR, the family holding company, is very very profitable and its shares too have been soaring for the last 2-3 years.

    BUT: Marchionne has stated several times that the industry in these 'permanent recession' times, and with the soaring costs of technology, regulatory compliance, and hyper/excessive-competition is on thin-ice, profitability-wise, ROC-wise.

    Clearly, then: some big move(s) to conserve capital and build scale-economies, cut-costs, share risks, reduce debt, boost margins are being urgently chased by Marchionne and FCA, since their shares are hugely up and the Chrysler-Fiat merger is such a success BUT the long-term financial health and immunity-from-the-next-financial-crises is nowhere near assured. Meanwhile they've committed to spending 52 billion dollars across FCA brands, esp Alfa Romeo and Jeep, through to 2018, when Marchionne retires.
    PradeepM and Dr. Fixated like this.
  3. prabhjot

    prabhjot Esperto

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    delhi ncr
  4. prabhjot

    prabhjot Esperto

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    delhi ncr
  5. prabhjot

    prabhjot Esperto

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    delhi ncr
    Sergio M has just revealed that he has met, on a recent trip to California, with the ceo-s of Google, Apple as well as Tesla. He has praised their 'intervention' in the car industry, and feels it will continue strongly, and thereby he has reiterated the threat to the car firms if they don't ready themselves for the expensive disruptions they're soon going to be causing in one or all aspects of the car business.

    The net is abuzz with rumours and speculations that marchionne could be tying-up formally with one or all three famous/notoriously wealthy and powerful firms, for the purposes of electric cars, in-car electronics' software and of course autonomous driving technology. He said he took a ride in the Google autonomous testbed car.

    The FiatChrysler stock was up 2-3 % on this news alone, it seems. It seems some investors and analysts are betting that he's dead serious (and is actively working on) about tie-ups and even JV-s or shareswaps/mergers with more than one firm, in order to boost profitability and return-on-capital-invested/lower risks and pool technology development spending, since the new long range regulatory fuel efficiency, emissions, and safety mandates are extremely exacting, cost-wise.
  6. prabhjot

    prabhjot Esperto

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    delhi ncr
    FCA's financial position is set to improve massively IF, as is probable though nowhere near certain, Europe continues its recovery from the horrific longterm slump in car sales it has seen over the last 3-4 years.

    First, Marchionne etc saved Chrysler, Jeep, Dodge and Ram, then revitalised Maserati, then managed thereby to save 'Fiat' which would otherwise have been wipedout by the severe recession in Europe, esp in Italy, while Marchionne cutback on investments in Europe/new models in order to not make losses like all the other european firms (barring VW), but still managed to grow the brand into a styling-authenticity-based 'premium-within-mass' image via the 500 variants, Abarth, the 500L and now the 500X. And of course the larger story of the rapid global growth of Jeep, especially in China, which is only just getting started. And is on the verge on a comprehensive high-tech brand-renaissance of the storied Alfa Romeo. Meanwhile, huge concessions extracted from the militant trade unions in Italy and a huge, plant-by-plant radical modernization both in Italy, and the USA, with all-new cutting-edge plants too in China and Brazil too.

    FCA's profit margins are set to improve considerably this year, although overall FCA remains very vulnerable to a slowdown in sales in the US, and in any case will struggle for profits since it has such a heavy and ambitious investment commitment through to 2018 (new Jeeps and its plants in China, Brazil and even India, new Alfa-s and huge marketing and distribution costs for the brand's speeding up, etc etc). Also: China is slowing, India contributes little, and LatAm barring Mexico too is in a longterm slowdown.

    BUT: fca has so many new products coming over the next year or three, from inexpensive Fiats to superexpensive Maserati-s, Alfa-s and Jeeps etc, and more relevantly, products in new segments and new price points and new global regions, that Marchionne's super-ambitious-seeming 2018 targets remain likely enough.

    He has exceeded all his previous aggregate targets for all the previous 4-5 years, so his record is incredible, as is the commitment of the Agnelli family who are taking no dividends out of 'their' firm, at least till 2018.

    He has the financial firepower, also, to do 'deals' big or small, perhaps more than one with other firms.

    He also has managed enough cost synergies via technology, platform, engine r&d and factory-capacity-utilization across the different FCA brands to be able to finance his way through the very-high-growth path he is targetting through to 2018.

    The FCA stock is up more than most auto firms, as investors bet on FCA's better-than-others growth prospects. Also, its improving financial metrics given the 10% stake sale of Ferrari, and the refinancing at much lower rates of the merger-legacy high-cost funding.

    BUT: overall profit margins remain weaker-than-many-other-firms, and so FCA remains vulnerable to a global economic slowdown/crisis, or wild currency movements, financing costs, etc.

    Exciting, for sure. The most exciting automotive firm, precisely because of where it has been (to hell and back), its uniquely high-growth prospects, its spread of storied/old/authentic brands, its burgeoning global spread....and its continuing precariousness or lack of immunity-to-crisis!
  7. prabhjot

    prabhjot Esperto

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    http://www.nytimes.com/2015/05/24/business/detroits-chief-instigator.html?_r=0

    A thoroughly researched article from the NY Times, no less, on Marchionne's deeply disruptive firm- and industry-leadership style and argumentation, including interviews with the man himself. Esp, about his public advocay of large scale mergers/consolidation.

    http://video.cnbc.com/gallery/?video=3000381130

    America's biggest and most popular/influential investor/investment advisor (the notoriously whacky Mad Money guy, Cramer, on CNBC) spending a lot of time on the FCA stock, regarding it as THE best auto company stock to invest in, for an even further rise in share price/sales+revenue+profit growth.

    http://video.cnbc.com/gallery/?video=3000381130
    asimpleson likes this.
  8. prabhjot

    prabhjot Esperto

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    delhi ncr
    Marchionne has just said that he expects 10% of ferrari to add a 1.1 billion dollars to FCA's net financial position.
  9. Ichimaru

    Ichimaru Regolare

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    Gurgaon, India
  10. prabhjot

    prabhjot Esperto

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    @Ichimaru

    FCA is minority owned or rather controlled by EXOR, the holding company of the Agnelli clan, headed nominally by John Elkann. They are massively profitable, despite their investments in the FCA brands, firms. factories, r&d etc, or more relevantly despite NOT taking a penny in dividends in their FCA ownership, not till 2018, at least, they've promised.

    Sergio Marchionne is the vice-president or some such EVEN in EXOR, which is like Tata Sons relative to one of their firms, Tata Motors. EXOR also owns and controls Case Industrial, New Holland and Iveco, which are NOT part of FCA. Marchionne is ceo/chairman of all those firms as well.

    Ferrari will now be like these other firms. 10% or so of their shares will be floated on the open market, leading to a billion or so dollars to the FCA balance sheet, to be used to retire the high-cost debt (some at 24%) forced on them at the time of the 2009 takeover/financial crisis-Chrysler bankruptcy.

    Ferrari will now be like say New Holland: an independently listed firm controlled by EXOR, with Marchionne as Chairman.

    It seems Ferrari was spun off in order to: (a) enable a flow of dividends to the Agnelli-s and the inheritors of the Enzo Ferrari family legacy (b) get a very very high valuation, at a time of record low interest rates, so as to get ultra-low-cost funds in order to reduce the high-cost debt load of FCA, caused by the cost of the merger/acquisition of CDJeepRam+Mopar, the biggest part of which was the high-cost liabilities to the UAW pension and health-car funds for FCA's American workers, and of course the high-cost loans given to them at bankruptcy in 2009 by the Obama Administration.
    Ichimaru likes this.

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