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FIAT - DEBT & Future Plans

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

  1. prabhjot

    prabhjot Esperto

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  2. prabhjot

    prabhjot Esperto

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    http://europe.autonews.com/article/...roduction-to-poland-to-free-capacity-for-alfa

    The endgame of the long-term Marchionne plan for the crisis-ridden European market, since he took over in 2004: stopping all manufacture of conventional FIATs in Italy altogether. Italy's high-cost plants, including now esp the famous and still cutting-edge WCM Gold one of the Panda at Pomigliano D'Arco, are ever-increasingly going to ONLY produce high-margin, luxe/sporty/suv brands and nameplates (i.e., not FIAT but Jeep, AlfaRomeo, Maserati, Abarth and/or of course Ferrari.)

    With the move of the Panda out-of-Italy, the 500X will be the only FIAT model still being made in the Italy. It too is there because it has decent margins but especially because it shares its busy plant with the VERY export-heavy Jeep Renegade. In the future it too will likely be shifted out (depending on the demand for the new Alfa-s and Jeeps) to the 500L Serbian plant, with its place being taken either by a Jeep Compass or a higher-cost/margin Fiat d-cuv (Freemont replacement) or a Fiat-branded c/d-phev (come emissions and cafe regulatory cutoff dates around 2020.)

    So far so good: the Panda and its platform mate (500) utterly dominate and with-rare european-market profitability the a/b-city-car markets Europe-wide, and their sales have rebounded massively well since the terrible depths just 3-4 years ago of the EuroZone debt crisis etc. AND: the new Alfa-s seem to going really well too, as are the new Maserati-s+Abarths.

    The plan, and this is an option other non-German-luxury-trio european firms (Renault-Nissan, PSA, Opel, Ford) do not possess: was all along to focus legacy and heavily automated/cutting-edge-modernized Italian plants, historic all of them: on exports of high margin branded models, LARGELY to outside-of-Europe (usa+canada, china, middle-east, japan, australia, some latam countries etc.)

    Thereby creating and enduring and more-structurally resiliant automotive industrial base for Italian high-cost+quality manufacturing+higher-margins-for-FCA overall in a european automotive context which is notoriously difficult to prosper financially in, in a sustainable way.
     
  3. prabhjot

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    http://www.autonews.com/article/201...onale-for-gm-fca-merger-stands-even-after-psa

    Marchionne is firing another shot across GM's bow.

    What he's saying is this: by end-2018, FCA will have zero net debt, 4 billion$ net cash, 9 billiion$ of net annual profits, plus such awesome and strongly growing premium brands as Jeep, Maserati and Alfa Romeo+Dodge muscle cars, plus Magneti Marelli, the new Alfa bleeding-edge platform and engines, plus large profitability in LatAm.

    THAT is when Marchionne will make a somewhat-hostile-if-necessary (via the share market and via large investors tired of the moribund gm share price) move on GM, to force it to the table for a merger.

    He retires in 2019. He knows that GM's peaked out in this business cycle and that the tide will now start ebbing away from GM's epic profitability in the usa (only in pickups and suv-s.) GM has no premium high margin brands that are working (ex-china where it has Buick and increasingly Cadillac) anywhere, and whatever money it makes in China is eaten up fully by its losses in LatAm, India, SE Asia, Europe etc.

    GM's desperate sale of OPEL, after so many efforts put into it, clearly shows that GM management is frightened of the share market and its large investors who are most unhappy with the quite stagnant stock price. FCA's stock price is up 100%+ over the last year: more than ANY other car company's anywhere in the world.
    --- Double Post Merged, Mar 8, 2017 ---
    http://www.livemint.com/Companies/p...swagen-showing-up-with-a-merger-plan-aft.html

    The serious Italian business press had reported (as i posted a few onths ago) that 'secret' full-scale 'merger'/strategic-combination talks were being held via investment bankers between VW Group (currently in crisis with overmanning, 20+billioneuros of dieselgate costs and set to rise by many more billions, dipping margins and marketshare for even audi, core vw brand in deep losses in europe even before dieselgate, failures of vw group in emerging markets esp Latam, and of course the dismally expensive failures of vw group in the usa+canada markets) and FCA/Marchionne/Agnelli-s/JElkann.

    Marchionne came close a year ago (which i had also posted) in an interview with Automobile Magazine to accepting that an fca-vw merger was well-in-the-works when talks stalled due to the irruption of the dieselgate scandal.

    Here, he is stating the vw combination as a strong not-merely-theoretical possibility.

    i.e., he will get this or something close to it done by his retirement date of 2019, by which time FCA will have acquired immense financial strength (no net debt, Jeep+Maserati+Alfa glbalization growth reaching fullness, 9 billion euros a year net profits, all plants retooled to cutting-edge WCM spec, all brands and all models replaced and renwed+greatly strengthened+focussed (except Lancia and to a degree Chrysler in the usa market.)

    The politics of such a large deal will be tricky though, hence whether it will be gm (because of trump's america-first-nationalism or whether it will be vw (which the trump admon may scuttle and/or maybe opposed by merkel+trade-unions as she/they did the takeover of opel by fiat+marchionne in 2008/9.)


    @asimpleson
     
    Last edited: Mar 8, 2017
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  4. prabhjot

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    http://www.autonews.com/article/20170313/OEM/303139949/gm-isnt-done-pruning

    Marchionne WAY ahead of these curves compared to GM, Ford or VW.

    GM is soon going to be regreting it did not take up Marchionne on his merger offer almost 2 years ago: that would've proven a lucrative and less-damaging way to've proceeded.

    Now, GM is stuck with a slowing usa market, fast dipping margins there, a return of over capacity issues, a too-strong $, continuing large losses in latam, risk of trade-frictions/war thanks to Trump with their only other profitable large market (China.)

    Marchionne may well make another 'proposal' to GM, except that GM management is in-charge: the firm has NO large shareholding, dominant business-family type 'owner'. GM management is, it seems, buying time for its management to carry on by retrenching in order to prop up share prices.

    Marchionne and fca will perhaps find GM a sitting duck in a year or two's time: FCA profitability and share prices are zooming while GM's having to shut-down/sellout/etc parts of its business. One or 2 dissatisfied activist, hedge fund GM investors and FCA has GM on-the-table: 'dealing'?


    PS: India is next on the chopping block for GM? One plant, in Gujarat, is being shut if the govenment permits which it isn't and won't for 'political reasons') already but even the other one? Unless GM finds a need to source latam small-car models from here: very likely, imo. Or, at any rate: GM ought to.
     
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  5. prabhjot

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    https://www.bloombergquint.com/busi...rogress-as-namesake-car-brand-s-margins-widen

    VW boss pretty much explicitly admits the likelihood/possibility of VW having 'talks', or as Marchionne said last week about vw and fca having a 'chat' soon, with FCA!

    And folks thought Marchionne is just a desperate ceo waiting to cash in big time on the eve of his retirement!

    Of course: the real heavy lifting in terms of such VW-FCA strategic 'consolidation' talks/etc is likely already well underway behind the scenes, with Marchionne but esp John Elkann/Agnelli and the Piech and Porsche families, Angela Merkel+Matteo Renzi (former and possible futre, again, Italian pm), the spd trade unions etc.

    Recall that it has indeed been confirmed that FCA and VW were well into board-level detailed discussions for a 'merger' type BIG deal when.....the diesel emissions crisis erupted stymying matters, which apparently were also being opposed by the labour union representatives on the VW supervisory board, etc.
     
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  6. prabhjot

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    http://www.businesskorea.co.kr/engl...g-electronics-decides-acquire-magneti-marelli

    Without any clarity yet on deal valuations, structure, including the question of whether fca will retain some stake in the new entity or sell only some parts of MM to samsung, but: the sale to Samsung electronics deal appears to be happenning indeed. 2.x billion euros total valuation of MM would be the least one could expect.

    While Magneti Marelli is quite profitable for a supplier-cum-IP/research based firm, non consumer facing (4.x% margins net and rising) it requires very very large and very risky investments in the frontier technologies in electrification and autonomous driving etc, even as its real strength is in automotive lighting and powertrains. Clearly then, like so many other supplier firms and oem-s, it needs to team-up (eg, bmw with mobileye with intel, etc etc) to fund all the reasearch with uncertain return for years. Hence Samsung, the recent acquirer of Harmon, also such a large player in displays, chips and battery/ev tech makes an ideal partner: it is supremely well capitalized and is eager to muscle in on the automotive business given the plateauing of its other electronics, cell phones, display etc businesses.

    Meanwhile MM's low margins, like all supplier companies, means that Marchionne would prefer taking a great valuation upfront in a total/partial sale of the firm, to be used to further accelerate fca's debt reduction in order to meet the 2018 goal of zero net debt, 4 billion euro net cash, 9 billion euros of net profit. FCA's pure consumer facing car brand operations are yielding net margins of 5.X% already and risingfast (already higher than gm, vw and ford.)

    Marchionne hates commoditized, brand-indifferent, non-high-Usp businesses and in any case is keen on a major platform and powertrain etc sharing through a 'merger' with another very large auto company as the only/better way of ensuring sustained profitability>cost-of-capital over the medium and longterms, that is: in and through a downturn or outright recession in major markets like th eusa, the eu or china.

    Hence MM will be sold, in whole or part soon. Next up will be the COMAU industrial robotics company, and maybe TEKSID, the metallurgic/specialist-aluminium-and-steel-alloy company too?

    Basically he is rationalising and cleaning up the FCA balance sheet and its holdings, in preparation for his retirement in 2019, so as to leave a financially strong firm that earns its cost of capital and provides a decent return on capital invested, one that is well capable of merging and/or acquiring another large auto company, nevermind say a recession in the usa market.

    @asimpleson
     
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  7. prabhjot

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    http://www.detroitnews.com/story/business/autos/chrysler/2017/04/26/fca-profit-quarter/100922200/

    FCA's global q1 20176 net profits UP 34% y-on-y, beating their guidance. Again.

    FCA's share price has shot up as much as 10% (!) to 11.6$ on the nyse, more or less the same as FORD, which is funny indeed since FORD offers a large dividend while fca does not, Ford has done share buybacks to propup the share price, and has 25+billion$ in net cash reserves, while FCA is still at minus 2.5billion$-by-end-2017.

    i.e., FCA is WAY outperforming Ford on the share market, with investors increasingly pleased and optimistic with FCA and Marchionne
    while being increasingly pssimistic, negative about FORD.

    FCA shares are up more than 100% over the last 3 quarters!

    Marchionne has beat his guidance in each and every quarter since the formation of fca.

    The surge in profits is mainly attributable to (a) increasingly good, richer model-mix, with a larger share of higher-margin, more prestigious etc models in the usa (no more commodity sedans, Jeep and Ram and Dodge muscle cars, plus also Maserati Levante and new Alfa Romeo Giulia and Stelvio), europe+turkey (esp Alfas and Maserati, plus Jeep), latam (Jeeps)

    (b) the benfits accruing from the abandonment of the Dodge Dart and Chrysler 200 sedans in a market where commoditised fwd sedan sales are plummetting for all firms, leading to losses for other firms on sedans BUT not for fca, which is in the usa+canada an suv and muscle/performance/luxury car specialist firm across brands

    (c) The 10%+ margins at Maserati, whose profitability is surging thanks to the Levante being such a hit across markets.

    (d) still-growing usa margins now at 7.3% while other firms are all seeing large net-usa-margin pressure due to much higher discounting etc

    (e) a disproportionately good/better sales and product/brand-mix performance in Europe, which is growing stronger than expected, with fca across brands (not just Maserati, Jeep and Alfa Romeo but also FIAT esp Tipo and Fiat Professional vans) handily OUTperforming there a lot. Net-margin in Europe now above 3%, and rising fast and a lot, as the new high-margin model launch cadence picks up further (Alfa Giulia+Stelvio, Maserati Levante+QP, Abarth 124, Tipo, new Jeep Compass...)

    (f) Jeep has already as much as 24odd% marketshare in Brazil in suv-s

    (g) the fca-gac jv in China is showing a growing trend of revenue but also profit growth thanks to the localized Jeeps (latest one being the new Compass) doing so well sales-wise

    (h) latam profits are pretty much at zero/flat, but with better prospects henceforth as the brazilian and argentine recessions are over now

    (i) Marchionne says he WILL achieve the 2018 plan target of zero net debt, 4billion$ net cash, 9 billion$ operating profit WITHOUT accounting for any sale or spinoff etc of say Magneti Marelli. He did hint again though that at some point in 2018 a 'deal' involving MM is likely. The share market and investors are ever increasingly VERY believing that he will indeed achieve this, even as most other auto firms are now in or are re-entering a long period of financial strain (e.g., gm, ford, hyundai-kia, vw group, psa.)

    FCA, being only an 8-year old firm is following a different rhythm as a company to the average in the industry, which seems like by 2018 end will leave it as one the few autofirms with a strongly improving financial profile, while others face strong downward pressure and pain financially.

    (j) He said that Jeep, which they say will easily meet its 2million global sales target by 2018, and Ram together could be entirely viable as Ferrari-like spinoffs/standalone brands. Whether that means he will look to spinoff Jeep+Ram, and also Magneti Marelli, at the sorts of super creamy valuations of Ferrari (only less so) is an open question, but it would indeed mean many many billions of $/euros of net improvement in valuations for the parts of fca, since FIAT, FIAT Professional, Chrysler and Lancia are high-volume but rather low margin and so dampen fca's overall valuations despite the stellar quality of say Jeep+Ram, MM, Maserati (financially speaking.)
    --- Double Post Merged, Apr 27, 2017, Original Post Date: Apr 27, 2017 ---
    btw, in 2007/8, before FIAT Group tookover Chrysler Corp, it included 2 very large and successful firms that are no longer part of FCA as such, even though they too have been and are still led by Marchionne personally.

    Namely CaseNewHolland+Iveco, and Ferrari.

    Ferrari's current, soaring marketcap is as much as 14.xbillion$, CNH's is also 14.x billion$, and FCA's is around 17-18billion$.

    i.e., the former FIAT Group is together worth 46-47billion$ today. With all three esp Ferrari and fca showing large and fast further improvements in financial 'performance'.

    All 3 firms are managed by Marchionne and controlled financially by EXOR, the Agnelli family holding company. EXOR itself is also mostly led (along with John Elkann/Agnelli) by Marchionne, has many other very large investments and firms in its portfolio, such as JUVENTUS football club (in the Champion's League semifinals currently), The Economist magazine (50odd% ownership share), and the very large re-insurance firm PartnerRE, among others.

    i.e., Marchionne has in the most EPIC way single-handedly transformed an embattled Agnelli family FIAT Group (when he took over in around 2004, when John Elkann was all of 22 i think with little experience and with his great grandfather, father, uncles all dead) into, finacially speaking in terms of market capitalization/sheer-wealth: one of the greatest old-family-owned conglomerates in the world once again, despite and in and through the 2008 global financial crisis, then the eurozone debt crisis, then latam recession, also Italian industrial-relations-and-political blues, etc.

    i.e., the utter credibility he commands among investors, bankers and analysts is behind the recent 100% rise in fca share prices, given that he has always delivered on each and every financial performance promise he has made on behalf of fca, ferrari or cnh, not to mention EXOR itself. Over a period of 13 years: always! A scarcely believable record for any ceo in any sector anywhere in the world.

    The fca profitability will continue to soar through 2018, and then he will retire in 2019, but many investors seem to very much believe he will do one last 'value unlocking' large merger-type deal (with either VW or GM?) plus a very likely sale or spinoff of Magneti marelli before he does, hence the fca share price seems to be gradually building that into the price as well. i.e., at a minimum and all-else-being-equal FCA share prices and market cap could, likely will: at least DOUBLE again by end-2018.

    What will be so remarkable will, of course, be that that financial performance will be against the overall grain of the overall autoindustry where most if not all firms (barring fca and daimler) are seeing increasing profitability etc squeezes set in, most notably VW group, gm, ford and hyundai-kia, also peugeot-citroen-opel.

    And fca remains such a high-further-potential growth firm globally since (a) JEEP's globalization is only just hitting full tilt; 2 million global sales by end 2018 is almost certain (b) Maserati and now Alfa Romeo are expanding fast (2017 alfa+maserati sales target is around 230,000 cars, and they're bang on track to achieve that), also globally including in China where (c) FCA is still tiny while growing scorchingly fast, while most others are potentially saddled with lots of over-capacity and over-investment there as it slows somewhat and (d) FIAT in LatAm has huge pentup potential just waiting to fructify as the region recovers from recessions and as all-new models continue to launch, with larger than ever exports to the rest of latam and esp Mexico, as well, even as FIAT has several niches in Europe it will re-enter soon(c-suv, sporty large hatchback) and as FIAT eurovans and small pickups, often or usually re-badged as Rams in some countries is going to be gradually taken to many additional countries (Mexico, Australia, thailand, china etc.) (e) the large growth with good profitability of Magneti Marelli, such as in india with amt-s and in automotive lighting, but esp also ddct, the new engines' electronics and sensors etc, and ph-ev plus 'autonomous driving' hardware and software, likely in concert with Samsung?
     
  8. prabhjot

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    For comparisons about financial health and profitability trends over the next year or two, FCA v/s ....

    http://www.autonews.com/article/201...d-profits-fall-on-recall-charges-higher-costs

    A much smaller, less diversified firm, but still:

    http://www.autonews.com/article/20170428/OEM/170429828/mazda-quarterly-operating-profit-plunges-56

    A larger and incomparable firm, because it is part of a GIANT korean 'chaebol' and with quasi-sovereign, state-sponsored status, still:

    http://www.autonews.com/article/201...t-slides-on-u-s-recall-china-s-korea-conflict

    A japanese firm that has been unprofitable for most of the last 5+years, for one reason or anothers, is still struggling despite a recent 'comeback' with hit new models in china (civic, hr-v etc) and in the usa (cr-v, pilot, civic)

    http://europe.autonews.com/article/...orecasts-profit-drop-despite-positive-quarter

    Finally, GM, which is having to huff and puff ever harder to sustain its profitability and esp its share prices, upto and including selling OPEL, and a potential departure from India where its accumulated losses are now more than 1 billion$:

    http://europe.autonews.com/article/...orecasts-profit-drop-despite-positive-quarter
     
  9. prabhjot

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    https://www.bloomberg.com/news/arti...terly-earnings-jump-16-on-suv-delivery-growth

    Another beating of already high analyst estimates.

    Global all-brand ebitda margins at well over 6% now, and still rising fast. Way higher than Ford or VW, not far off GM's.

    USA car slowdown is not affecting fca at all, in fact the revrse, since fca had withdrawn the Dodge Dart and the Chrysler 200 well ahead of everyone else who are now struggling hugely with unold inventory and losses etc on sedans, a sub-market that is tanking hard in the usa, as elsewhere (in favour of where fca is strong: suv-s, pickups and performance+luxury cars.) Margins still rising, while EVERYone else's in the usa are trending down, a lot, esp Ford, Toyota+Hyundai lose money in the usa currently etc: up well past 8% now.

    All divisions profitable: the ONLY such auto company in the world. usa+europe+china+latam+maserati+magneti marelli+comau robotics. Margins pushing higher in europe, well above 3.5% and rising, thanks to Maserati, Alfa and the FIAT Tipo mainly.

    Maserati sales up massively (mainly Levante suv.) Huge gains in europe, china and the usa. Margins higher at as much as 14% which is as good or better than say Jaguar-LandRover i beleive, and higher than bmw, audi and mercedes.

    LatAm sales rising a lot again, thanks to Compass and Argo +Toro. Margins up, marketshare up a lot in Argentina, decent net profits despite the recession in brazil and the very tepid economic recovery there.

    Asia-pac sales soaring thanks to the China jv Jeeps, esp the new Compass: decent profits from China, already. In 2 quarters' time there will imo significant profit contributions from India and from India-exports as well (Ranjangaon jeeps and Tata-s.)

    Magneti Marelli shows large growth in sales, in revenues and profits/margins=4-5% and rising. 60%+ of Magneti Marelli business is now 'non-captive', i.e., from outside FCA (some from ferrari and CaseNewHolland Industrial though.)

    Net debt is still at 4.xxbillion$, but they WILL without any doubt meet their target of reducing that to below 2.5billion within the next 6 months. In any case debt costs (bond rates etc) are super low, finally, for FCA, an advantage other firms but not it have been enjoying continuously since 2009/10 when the usa fed reserve began its QE or 'money printing' programme. FCA was coerced as part of the merger deal for Chrysler by the usa fed Obama admin to take and pay back ultra high cost loans from the usa government, instaed: until recently, i.e., around the time the Ferrari spinoff and IPO happened, with FCA thereby offloading a large part of its debt onto ferrari, which too is REALLY booming in profit margins and share prices etc since then.

    Net-net: FCA remains the only large mass volumes automotive company to be seeing such an improvement in financial performance/health, since they are or nearabouts peak, saturated performance while FCA is only just starting its fast 'bull/toro run'!

    FCA is running well ahed of schedule/timeing for a meeting of the 2018 Marchionne promise of, for FCA globally (all brands and divisions): zero net debt, 4billiioneuro net cash, 9 billion euro operating profit and net profits of around5-6 billion euros. Currently net profits seem around at this quickening rate to be set to easily meet the 2017 guidance promise of aorund 2.5billion euros+.
     
  10. prabhjot

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    http://www.autonews.com/article/20170727/OEM04/170729761

    FCA's proprietary EV technologies, a lot of it housed in Magneti Marelli, first available on the Chrysler Pacifica hybrid, a win-most-awards new model in the usa, will next be deployed on all-new Maserati-s starting 2019 (Alfieri 2 seat coupe and cabrio), being too expensive-with-little-end-customer demand for the other brands as yet, with because of the turn against diesels in europe around half of all of fca's models from all brands getting 'electrified' by 2022 (i guess he's referring only to europe+china+usa here, not necessariy Brazil/latam or the likes of India as yet.)

    Mike Manley and Marchionne have already repeatedly confirmed plug-in hybrids for Jeeps worldwide by around 2020, starting with China (China-only Jeep K8/Yuntu) and an e-rear-axle Wrangler offering.

    Post-2020 in India too small diesels and maybe all diesels (IF the union government decides on an ev-subsidy+cafe/emissions etc etc programme) could mean that fca and/or Magneti Marelli will introduce mild hybrid tech here, as in: locally-made, combined with the MM amt/ddct, for sale to the likes of Tata, Maruti Suzuki and others too?

    Marchionne is a big advocate of cost-sharing-through-scale-economies by sharing powertrains-across-firms right around the world, the best example fo which is actually fca in India which has had and will have (2 litre mjd) a LARGE non-captive market here.

    Magneti Marelli will most likely be spun-off (exor/agnelli-s retaining ownership overall, though, like with the Ferrari spinoff?) or sold in 2018, he said 2 days ago, while also emphasizing the point of the previous para of this post of mine, especially in the new context of loss-inducing government powertrain/electrification mandates and compulsions.
     
    Last edited: Jul 28, 2017

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