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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

    delhi ncr

    Here's a guy who means what he says, always eloquently and with a degree of blunt provocation and frankness, and yet always truthful.....and what's more has been doing-and-achieving-what-he-says for over 12 years now. Sergio Marchionne, ceo of FiatChrysler, Ferrari, CaseNewHolland as well as EXOR, etc etc.

    btw, Ferrari shares listed today, and shot up to 60$ (from the IPO pricing of 52$) on day1, on Wall Street.
  2. King CM

    King CM Amatore

    prabhjot likes this.
  3. prabhjot

    prabhjot Esperto

    delhi ncr

    If this lot of (interested) FCA- and Italy-bulls/toro-s are to be believed, and I do, pretty wholeheartedly since their analytics are excellent AFAIcan make out:

    Italy is rebounding, finally, from its long-term growth slump and the euro-recession: stronger than most. And is seeing some of the greatest political-economy reform in the EU.

    Italy's car market is rebounding pretty much the fastest of the bigger Euro markets.

    FCA is growing market share in Italy.

    ergo: FCA will, as it has been over the last year, grow marketshare in Europe-as-a-whole more and faster than the other, bigger major Euro market players. In addition, FCA is and will like continue to gain marketshare in other big markets (eg., Spain, France and Germany) with new vehicles like the renegade, 500X, the new alfa-s, the Aegea sedan and hatch+SW.....

    FCA is already that rare non-luxe car company to be profitable in Europe: perhaps the ONLY one on a net rather than operating basis?

    Meanwhile the European Central Banks QE program is strong: resulting in a very competitive euro-dollar rate. And the gratuitous-austerity-policies are perforce being loosened by the migration 'crisis'-related spending and popular political angst from left and right.

    The buoyant european and especially Italian+German market conditions bode well indeed for the Alfa Romeo brand re-launch, since it is after all as yet a very euro-centric brand.

    Also meanwhile: FCA has, for the JEEP brand and of course for FIAT (in some regions) finally got the cost- and especially currency-competitive manufacturing and supply-base (Brazil, turkey, india, china+mexico), resulting in big currency gains, and very competitive costing as JEEPs (renegade, compass, rumoured a-segment jeep) are exported, often being introduced to many (emerging) markets for the very first time (e.g., India) even as the brand-awareness level is already high.

    Finally, even if the US market is at or very near a top, IF interest rates stay low as do fuel prices, which are both likely, and FCA keeps at it in the US with the planned cadence of new launches: FCA's strong sales, revenue and improving profitability in the US+Canada are assured?

    In sum: FCA is set to significantly outperform most peers, especially given the lower exposure to a troubled China and the incredible profitability plus just-started 'premiumization' (Renegade) in LatAm DESPITE the severe recession prevalent there. To which must be added the balance-sheet benefits of the Ferrari spin-off.

    2016 could be a banner year for FCA, financially. Through to the end of the 5-year plan: 2018? I can see Marchionne having something like the last laugh at the end of this plan too, just like he did on the first one.

    Caveats apply, of course: recall costs and crises? china-induced further-global slump? new euro-crisis perhaps caused by the coming to power of far-right populist parties (not Italy or Spain or Germany)? inflexible margin-growth even if sales and marketshare grow well?
  4. prabhjot

    prabhjot Esperto

    delhi ncr

    Meanwhile: FCA has just used the proceeds from the Ferrari 10% spin-off IPO to retire 3 billion+ worth of high-cost, 8.5%, and highly onerous (in regulatory terms) 'senior' debt which was foisted on them by the US administration as part of the original merger.

    i.e., the merger had been incomplete until now, in a regulatory and financial sense since FCA as-a-whole had been denied access to a large part of the original Chrysler corporation cash, and was forced to 'ring fence' the US part of FCA financially, to a large degree, from the rest of FCA.

    i.e., FCA and Marchionne now have full and complete control over the finances of the merged entity, and so can, pay better attention to other brands (e.g., FIAT, Alfa Romeo, Magneti Marelli, FPT+VM Motori diesels, Maserati) than just the American ones, and to other geographies than just the North American one. IF they so deem reasonable from a long-term brand and sales health perspective, that is.

    The point is that Marchionne+Elkann have just achieved not just big improvements in FCA's debt-heavy , if 1 billion$+ net profitable in fy 2014, balancesheet but have managed to achieve full and complete freedom from the restrictions imposed by the Obama administration as part of the merger/acquisition.

    FCA finally is, like any other NYSE etc listed corporation, enjoying full legal autonomy of capital allocative decisions and of global brand, technology, model-lineup, and sales etc strategy.

    This has of course long been in the planning, and has been timed this late only for legal-convenant reasons and because the formal merged existence of FCA is barely a year old.

    On cue, what do we find? A quickening of pace and attention to the new-model, new model development and launch, and new geography attention (esp china) being paid by FCA and Marchionne for the non-American brands and models (excepting Jeep to a degree). New Aegea, upcoming new Alfa Giulia and Alfa brand launch, JEEP plant launches in China and soon brand and manufacturing launch in india too, new Brazilian palio+Punto+g sienna+bravo+Linea replacemnts by end-2016/2017, .......

    It will therefore be interesting to see if Marchionne and Manley (who heads both Jeep globally and Fiat in asia-pac) regard India in a particularly optimistic light for FIAT, rather than only for JEEP+exports.

    Will India be getting a good share of these new monies/investments now being made available for the non-CDR and esp Jeep brands? Does a 'good prudent' share mean 'much-more' for the FIAT brand in India or merely 'about the same' or 'even or much less, maybe nothing?'
  5. prabhjot

    prabhjot Esperto

    delhi ncr
    After a long-series of good-news, in terms of American and european sales and marketshare growth, and improving revenues and profit margins too, thanks esp to the phenomenon that is the old/new JEEP on a global basis, the share price listing, the among-highest-in-the-entire-auto-industry P/E ratios and share price increase since the listing, the very successful Ferrari 10% divestment/spinoff with concomitant debt-level reduction in a big way: the first BIG pothole for the new listed FCA.

    The minute they announced that Ferrari had been finally seperated formally from FCAL the share price tanked nearly 38%!! That is a catastrophic sudden-drop, and quite rare. Of course, the overall markets have been bearish for a while and today was a day of carnage for most stocks, still.

    They would have anticipated a big-dip in FCAU share prices since Ferrari's large-profits are no longer on their book, but would they have bargained for such a ruthless response? I guess once the market digests the financial reports over the next quarter or two, the financial effect of FCA's improvements in europe and of esp the reduction-of-high-cost-debt will get acknowledged by the market and the share price will move back to its high growth, high p/e ratio. BUT then, the overall markets are going to be very weak and volatile/nervous foreseeably so i suppose FCA and Marchionne will have to be just-as-canny as ever in navigating the delicate financial situation in 2016. They are already taking action: extending the Alfa rollout by 2 years 92020 rather than 2018 for the 8 all-new models) and cutting overall capital spending somewhat for FY 2016.

    I am guessing then that FCA india will be cooling its heels through 2016 and into 2017 too, other than for the Jeep brand and dealer launch etc.

    India cannot possibly be anywhere near a priority market for the Fiat brand for Marchionne through 2016/17, surely, given the huge investment demands for the American brands, the Alfa Romeo new models, the new LatAm models, a rebounding Argentina, a very-rebounding Italy and Europe, not to mention the big investment commitments for new Jeep plants and lines/supply-chains etc in China?
  6. jackharrisw

    jackharrisw Amatore

    I am confused now. I thought Ferrari is still under FCA's control? Am I wrong?
  7. prabhjot

    prabhjot Esperto

    delhi ncr
    The elkanns/agnellis still control Ferrari and own the biggest share of it, marchionne remains its boss, but it is now a 'spun-off' seperate firm. The 10% share IPO etc has, all told through several financial moves, yielding a net-benefit of 3.xxbillion$ to FCA (Ferrari has taken on some fca debt, ipo proceeds at the very high price achieved, retirement of expensive legacy debt etc).

    They have 'sold it' to......themselves, and pocketed HUGE monies i the process, is the best way of putting it! ;-)
  8. prabhjot

    prabhjot Esperto

    delhi ncr

    Excellent financial results for FCA in 2015, esp the post-Ferrari-10%-IPO/spinoff-to-themselves.

    ALL financial parameters well better than their own guidance as recently as last quarter, beating pretty much all analysts' expectations. Except: net annual profits, which have been affected by the one-time charge they've taken for 'recall' related work and fines. i.e., next quarter's profits will soar, since the charge has already been made, and very aggressively at that!

    Net debt reduction is fantastic down 5 bilion$ plus, given that Fiat/marchionne finally has access to a lot of the old Chrysler corporation cash i.e., the books are finally fully consolidated. This results in much che3apers debt financing, something that is already available for very cheap because of all the 'quantitative easing' that western and the japanese central banks have been doing (and continue to.)

    Recall fines and costs were high though, nothing out-of-the-ordinary as firms from toyota to honda to ford to hyundai and gm and of course currently (hugely!) VW have had to and continue to endure the financial hit from the much-tighter regulatory and legal environment (except in....India of course!)

    Europe+Middle East+NAfrica (which was in severe recession a year and a half ago) has returned to profitability a year in advance of the 2014 plan, with more coming (Tipo models, new Alfa-s, etc) BUT

    Brazil has tanked, though FCA is still, uniquely, profitable in LatAm. China is slowing, as well. And:

    the booming American market and FCA's brands being the boomingest of nearly all firms in that market is set to slow starting in 2016.

    And if there is a full-on global economic meltdown again....? Only Toyota can be said to be 'safe', everyone else will be in trouble, for profitability and over-capacity, not enough capital for the huge new costs that've been added to new model development for various reasons, from the tech disruptors like google to the regulatory crackdown, etc, etc.

    We can bet Marchionne's well-on the job preparing for a big merger/acquisition/etc if that were to occur. Since he's been banging on to the complacent auto industry about such threats (and others) for the last year, in fact in one form or another for many years now, EVEN as the American and chinese car market booms were going really really strong).

    He has just announced that FCA will soon-enough stop making the Dodge Dart and Chrysler 200, replacing them, instead, with an OUT-SOURCED/re-badged/jointlydeveloped model or two, to be built ANYWHERE but in the US or Canada. Likely: either Mitsubishi (an old Chrysler corporation partner), or, as with the Fiat 124 Spider: Mazda.

    For the US market he's going full-tilt with cuv-s and suv-s, going forward: NO compact and midsize sedans at all, at least not madeinNAmerica in FCA plants.

    For other regions: they've reaffirmed the 2014 global plan, giving no details though, other than about Alfa Romeo.

    So, for India, that means: new Punto, new grand Sienna and 'New Avventura' in 2017 and 2018. No 500X or L by then. And of course the Jeeps, esp the India-made c-suv or new Compass, but perhaps in 2018: a further, smaller, cheaper locally-made new JEEP model, the renegade or one smaller/less expensive?
  9. prabhjot

    prabhjot Esperto

    delhi ncr

    Yet another absolute triumph for Marchionne!

    Ferrari has achieved un-heard of margins in the auto industry, exactly as he had promised at the time of the spin-off of ferrari.

    AND: Ferrari is once again leading in Formula1.

    At the time almost all analysts and commentators were skeptical of marchionne's claim that he would aim for 'luxury goods manufacturer'-like margins (eg., like Hermes or Louis vuitton, etc.)

    As usual: he has been proven right, and ferrari's share price is WAY up on its already high, creamy valuations at the time of the ferrari spin-off.

    He has achieved this without giving up exclusivity. Even the expanded sales-numbers of 10000 (all guaranteed since all Ferrari-s having assured buyers and long waiting lists) for 2020 is no dilution of the brand's increasing exclusivity since (a) the potential client base is that much larger given 'new uber wealth' in all-new countries (i.e., emerging markets) like China, Russia, Central Asia, ASEAN, even India (b) global wealth and sheer inequality has and is continuing to soar (c) the rich all around the world have access to 'credit'-costs that are pretty much zero: i.e., they increasingly have FREE money and risk-free wealth.

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