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FIAT - DEBT & Future Plans

Discussion in 'Fiat Global News' started by Raj_pol, Feb 23, 2016.

  1. Raj_pol

    Raj_pol Superiore

    Messages:
    520
    Bangalore
    Punto Evo 1.3
    http://www.autonews.com/article/201...s-a-partner-but-says-fca-can-survive-alone-in

    A very interesting analysis - read through the whole article for those who are interested. There is also a very important point as to why FCA cars might be in general heavy and nope nothing to do with safety actually.

    1. "All FCA platforms are reworks of architectures Marchionne found when he joined Fiat in 2004 and took over bankrupt Chrysler in 2009. To meet crash standards, each new model had to be heavier than its predecessor. That means higher fuel consumption as competitors launch lighter models on new platforms. So over time, the weight disadvantage increases for FCA."

    2. "Many of FCA's top-selling vehicles ride on platforms that would be considered out of date at other automakers. An example: The Dodge Charger and Challenger and Chrysler 300 are based on a Mercedes-Benz platform first used by DaimlerChrysler in the 2005 model year"
    varoon9999 and gpunto75 like this.
  2. acechip

    acechip Superiore

    That may not necessarily hold true for Linea since it was created specifically for developing markets based on the Punto platform. And truly speaking, Fiat cars arent all that heavier than competition as such. Not by a significant margin anyway. The Linea is only about 60 kg heavier than the Vento TDI. The Ford Ecosport, which is a sub 4m car, weighs more than a Linea. So does the Duster and the Creta.
    Its just that Fiats feel better built in the right places, ie, doors, bonnet, boot etc.
    asimpleson and gpunto75 like this.
  3. prabhjot

    prabhjot Esperto

    Messages:
    2,792
    delhi ncr
    The article is referring to FCA's usa legacy models. They do have new platforms+architectures that have been developed precisely for the post-merger models. Capital investment, brand-health etc constraints post-merger meant that the first iterations of the Punto platform iterated into the "Small US Wide" (4X4) used on the recent post-merger models such as the 500L, 500X, Renegade and now the Tipo/Aegea threesome are all very high safety rated, without being extra-heavy.

    The over-weight issue applies to the first Alfa Giulietta-adaptated platform (for the Dart, Viaggio and Cherokee, and the Chrysler 200 sedan): the CUSW, Compact US Wide. But not by much.

    As for the legacy pre-merger models, FCA had chosen to facelift them inside and out, throw in the 8- and 9-speed ZF gearboxes (made in-house, licensed from ZF) instead of re-doing their architectures comprehensively. That was for reasons of achieveing fuel efficiency gains despite the added weight since the platforms are indeed old. The idea was to focus on new Jeeps, now new Fiats and Alfa-s while waiting to beefup the revenues and profit-margins enough to also address the platform obsolescence issues with some of their old, bu famous sub-brands in the usa: the Pacifica minivan replacement, and the Dodge journey/Fiat Freemont replacemnt currently undergoing testing. The Pacifica is built on yet another, much lighter, stronger and more rigid CUSW-based architecture, different somewhat to the one used on the Dart/Viaggio or the Cherokee.

    Of course, the ligghtest OF ALL platforms are both FCA: that of the Alfa 4C, likely to spawn also a new Ferrari Dino (mini-cheaper supercar), and that of the upcoming-for-sale Giulia which will be by a distance the lightest car with the best power to weight ratios across any variant in its segment (c class merc, 3 series bmw).

    Almost all FCA cars on both sides of the Atlantic are 5-star rated or the equivalent. Until the test parameters shift, that is.

    This lightness fetish in the western markets is completely wrong for india. They do it without compromising safety through use of high-strength (somewhat exotic and more-expensive) materials in order to meet fuel efficiency and emissions norms better, while also ensuring better handling and braking.

    In India: it only means less safe cars, poorer riding, more expensive to repair, harder to survive scrapes and crushes let alone crashes, with higher-profit margins for the likes of Maruti and Hyundai.

    Safety and repair-ability, as also ride-quality etc are ALL ELSE BEING EQUAL, a function of, among other things: sheer weight. Other than via the use of exotic and expensive lightweighting materials.

    The new Punto (X6H) and new Grand Sienna (X6S) scheduled for 2017/2018 in India, and currently being tested in the us, brazil and europe, will apparently be a good 80 to 100 kgs lighter than the current Punto/Linea. the Tipo/Aegea is lighter too, i believe, adjusting for its bigger-size?
    varoon9999 and gpunto75 like this.
  4. acechip

    acechip Superiore

    Its all about an acceptable compromise. Today's modern jets like the Dreamliner B787 and Airbus A350 are made of carbon composite material in a number of areas. But both pass the stringent fatigue tests such as static wing bending test easily. Now, can they stand heavy hard landings and such abuse through their lifetime without sustaining any stress fractures ? Are they robust enough to operate in harsh ambient conditions like lets say, a VC-10 of the past or the Soviet era Tu-154/IL-62? I think not. Effectively speaking, they are the Hyundais and Toyotas of the aviation world. Fiat Punto/Linea are the Boeing 747/Tristars/DC-10s, robust but largely unloved in todays times!
    varoon9999 and dadasaheb like this.
  5. prabhjot

    prabhjot Esperto

    Messages:
    2,792
    delhi ncr
    They've grown net profitability about 28% y-on-y in the sept 2016 quarter.

    They've raised their full-year guidance to total annual net profits for 2016 of around 2.5billion$, and a net-debt level of below 5 billion$, with 1.5 billion$ worth of maturing bonds being paid off from cash in q4 2016.

    They've reiterated the commitment to eliminating all net debt, in fact getting to net-cash-positive of around 4-5billion$ with annual net profitability of around 8 billion$ by end 2018, just 2 + years away.

    Seems tough to achieve, especially since the booming growth of the usa auto market seems over by-now, but Marchionne has always delivered on each and every financial promise he has ever made to investors/analysts and bankers since he took over Chrysler/Jeep etc, and the momentum's in his favour (new models outperforming, brands outperforming the market-averages in most markets/regions, fast and large growth from a low base in China, potential rebounding of the Brazilian market/economy in 2017, much wider and better dealership coverage in many countries for Jeep/Alfa/Maserati.......), plus there is the likely sale or profitable spinning-off of either Magnetti Mareli and/or the COMAU robotics divisions?
    asimpleson likes this.
  6. prabhjot

    prabhjot Esperto

    Messages:
    2,792
    delhi ncr
    FCA's share price has been zooming since (a) the last quarter's financial outperformance report (b) the election victory of 'the Donald'. And how!

    From the low $6.xx to the mid $8.xx in a month and a bit!

    FCA's share price has zoomed greater than that of the other 2 'American'/Detroit firms (in % terms.)

    How come?

    (a) the market has come to appreciate the peculiar geographic AND market-segment concentrated strengths of fca as against other firms. e.g., fca is strong at high-priced suv-s and pickups in the usa market, and yet is listed in euro-s, and so with the rising margins in the usa AND the hightened us$ strength: a pure currency tailwind to FCA's net profitability

    (b) the market's recognizing that with Maserati growing with current margins of 10%+ from being a tiny boutique, artisanal exotic/historic brand to a larger-yet-exclusive sales-numbers one, FCA's net margins are trending upwards even in europe. Likewise, the initial excellence of execution and sales of the new Alfa Romeo 'giorgio' platform and the new powertrains gives fca something many other firms would kill for: a mass-luxury/sporty brand that can retail at the prices and the margins that the German luxury trio (and Jaguar-LandRover) command, and in decent and high-growth, 'white space' numbers.

    (c) Marchionne has wasted not a penny chasing the ev and autonomous driving fads, even as FCA and Magneti Marelli have the r&d ongoing to make those moves WHEN and only-when the marketplace will actually reward such models and features with profitability

    (d) the embedded value of at least around 3billion$ of Magnetti Marelli which the market rightly bets will either be spun-off with an IPO and/or sold or JV-ed with a Korean or Chinese autocomponent supplier firm (but not a private equity type one)

    (e) the market appreciates Marchionne's refusal to get into incentive and discount wars selling highly commoditized cars, esp sedans, going up against the cheap currency-based East Asian firms and GM-Korea/China in the usa sedan market. Marchionne has simply discontinued the Dodge Dart and the Chrysler 200, instead, claiming that the market's moving permanently towards cuv-s and suv-s and so fca will use its available usa/canada plants only to build higher-margin suv-s and pickups and large rwd sedans (eg, Dodge Charger, Chrysler 300) as well as the Pacifica Minivan (higher priced, and also a hybrid variant.)

    (f) the market sees the further pentup demand for Jeeps: esp the new Compass, to be made in Brazil, mexico, China and India too, an entry into what is more or less the largest and most lucrative segment of all markets around the world. JEEP had not any plausible entry in this segment as-yet.

    (g) finally, the market is impressed by fca's ability to be profitable (uniquely so) in Latin America DESPITE the severe recession in Brazil over the past nearly 2 years now. Now that a bottom's been reached and some rebounding is underway again, and now that te all-new models are all doing very well, are segment toppers in Brazil. Argentina is rebounding smartly too.

    (h) some hedge fund investors (higher risk takers) have said they're investing in fca and exor (the agnelli family holding company, also managed by Sergio Marchionne) since they feel certain Marchionne will merge or sell FCA to achieve the minimum 6m vehicles sales (from around 5m right now) which he has long insisted in the bare minimum for adequate profitability in-and-through the ups and downs of the business cycle. Marchionne retires in 2019, so.
    amitshedha likes this.
  7. prabhjot

    prabhjot Esperto

    Messages:
    2,792
    delhi ncr
    To add to the previous post (and btw the share price continues its fast zoom up: now to over $9):

    there are rumours that FCA will spinoff/sell Alfa romeo and Maserati is order to achieve the zero-net-debt by 2018 pledge by Marchionne+4billion$ net-cash-reserves by then. Just as he did with ferrari, while, of course, retaining management control de fcato but NOT de (financial) jure.

    imo a psinoff or even sale of Magneti Marelli and/or COMAU is very likely, BUT not so of Alfa and Maserati and/or Jeep. Not yet, at least.

    A Ferrari-style spinoff (extremely lucrative for fca, since valuations were extremly creamy for the 10% shares IPO AND since fca transferred a fair bit of its debt onto Ferrari) of Alfa+Maserati and/or Jeep could indeed make very brilliant financial-engineering sense.

    But, obviously: not yet. Perhaps in 2018/19: around Marchionne's retirement? Whereby FCA does the engineering, design and manufacturing FOR a spunoff firm that ONLY owns and/or manages just the BRANDS. These being historic,charismatic, global and high-margin. i.e., able, just like JLR-Tata and maybe Volvo-Geely able to go up against successfully at the high- and stable-through-downturns margins of the German trio of firms (Merc, bmw, audi+porsche.)

    THAT could happen, but not yet, since the strengthening and re-establishment of Alfa, Maserati and Jeep on a GLOBAL basis is as yet an incomplete process, albeit that the new Alfa-s andMaserati-s have cutting edge tech, engineering, design and powertrains. Given just another 2 years (at which point Jeep too would have an all-new Wrangler, all-new grand Cherokee,all-new Wagoneer 7 seater, refreshed Cherokee, all-new a/b-suv for eg in India, plus the all-new Compass) and given the shared dealerships around the world between Maserati, Alfa and/or Jeep.

    i.e., these three brands could be spunoff while fca becomes a sort of engineering and manufacturing contractor/supplier for such a spunoff, brand-centric and with-big-new-investors new firm.

    IMO Marchionne's likelier strategy of first choice is to first spinoff/sell Magneti Marelli and Comau robotics. Then around the time of his retirement: to consummate a BIG merger with another large firm (say Ford, GM or VW or even who knows Tata-JLR) failing which the above strategy would also yield huge financial benefits in terms of health and longevity to FCA and to all its brands in all its markets.

    The stock market now appreciates that Marchionne's one way or another going to be able to pull off the otherwise difficult-seeming 4 billion of net-cash/zero-net-debt by end-2018, which is why FCA's share price is zooming upwards.

    The market's realizing that FCA has been a grossly undervalued firm, since it is such a YOUNG firm (not even 8 years old) and YET has strong, very high-growth and high-margin-capable historic brands (like Alfa, Jeep, Ram, Maserati +Ferrari) while also having high-cash-flow generating bread and butter style brands too (Fiat Professional +Ram, Fiat europe+Latam, Chrysler, Dodge.)
  8. Ichimaru

    Ichimaru Regolare

    Messages:
    439
    Gurgaon, India
    If Sergio ends up separating even Alfa and Maserati from FIAT after Ferrari, then; as far as I am concerned, he is a failure and can quite literally **** *** !!!
    Raj_pol likes this.
  9. prabhjot

    prabhjot Esperto

    Messages:
    2,792
    delhi ncr
    He WILL do his utmost to be zero-net debt, 4 billion or so net-cash, 5 billion or so net profitability by end-2018: 2 years hence (when he retires.)

    As the soaring share price indicates: more and more investors and analysts believe he'll get there!

    https://www.bloomberg.com/news/arti...rs-final-push-to-free-fiat-chrysler-from-debt

    Spinning-off the premium brands (Alfa, Maserati, Jeep) into a seperate brand-only (not engineering or manufacturing or IP) entity that then garners large and lucrative investors will remain an option: but not yet. The final phase of the high margin Jeep globalization, the all-new Jeep models: new Wrangler, new Wrangler pickup, new grand Cherokee, new Grand Wagoneer, refreshed Cherokee, plus the continued vast expansion of Maserati to around 70000 sales by 2018, and of course the full re-establishment of Alfa esp in the usa and in China is now well-underway, and will all ensue by end-2018 or so. THAT is when such a brand-centric spinoff, with fca then becoming a sort of engineering, design and technology services and contracting firm to the said brand-owning entity with other, large and lucrative investors would make the brilliant 'financial and managerial engineering' sense that Marchionne is so famous for.

    imo his first preference, though, remains for a LARGE merger with another large autofirm (say a VW, a Ford, a BMW .....)

    He retires in 2019: he'll get something big or the other done by then, that is for certain, one way or another. The man's a visionary aristocrat of a manager/ceo, after all he's Italo-Swiss-Canadian-American. ;-)

    @Ichimaru
  10. Ichimaru

    Ichimaru Regolare

    Messages:
    439
    Gurgaon, India
    If all he does is to spin off these legendary brands and separate them from FIAT to get rid of the debt, then sorry; I can't call him a visionary.
    Then he would just be a sour loser. I hope I am proven wrong though. I used to be his fan, still am but much less after the Ferrari spin off.

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