Fiat Chrysler may be very close to breaking itself up

Fiat Chrysler may be very close to breaking itself up

• Matthew DeBord

FCA CEO Sergio Marchionne.Bill Pugliano/Getty Images
FCAU Fiat Chrysler Au
12.58 0.97 (+8.40 %)

• A Chinese company reportedly made FCA a buyout offer, but the US automaker refused.
• FCA CEO Sergio Marchionne has hinted, though, at merging the company with another automaker.
• Marchionne has also hinted at spinning off FCA brands, including Jeep.
Automotive News reported on Monday that Fiat Chrysler Automobiles rebuffed a buyout offer from a Chinese carmaker.
FCA CEO Sergio Marchionne has been trying to merge the company with another automaker for years, so the news wasn’t exactly earth-shattering, and Automotive News wasn’t able to pin down exactly which Chinese company made the bid.
But it’s pretty clear that Marchionne’s game plan before he retires in 2019 is to complete an arc for FCA that began back in 2009, when Fiat took bankrupt Chrysler off the US federal government’s hands.
Marchionne already spun off Ferrari in what has turned out to be a highly profitable 2015 IPO; Ferrari is currently the best-performing stock in the auto sector, up 87% year-to-date (that’s better than even Tesla).
On earnings calls, he’s hinted that a combined Maserati-Alfa Romeo could be next. Or Jeep, the crown jewel in the old Chrysler brand and a division that’s been raking in the profits for FCA amid an SUV boom in the US.
Here’s Automotive News:
According to one source, any sale likely would involve FCA’s highly profitable Jeep and Ram brands, as well as Chrysler, Dodge and Fiat, but would exclude Maserati and Alfa Romeo. Those two brands would be spun off, as was Ferrari, to maximize returns for Exor, the holding company controlled by the Agnelli family, which owns a controlling interest in FCA, the source said, speaking on condition of anonymity.
For all practical purposes, Marchionne wants to maximize value for the Angellis — Gianni Agnelli made Fiat into the Italian industrial colossus it became after World War II — and his guiding idea is that FCA’s individual brands are worth more than the company as a whole. For example, Ferrari now has a market capitalization of $20 billion — more than FCA’s $18 billion.
Jeep could be worth far more than that.
Actually, Marchionne’s success with the Ferrari IPO could be influencing his current thinking. He unsuccessfully lobbied for General Motors to merge with FCA in 2016, but that was before Ferrari shares took off in 2017. Marchionne also might have thought that President Trump’s administration would lend and assist in pressuring the Detroit rivals to combine forces, an outcome that doesn’t appear to be on the agenda.
So spinning off brands might now be his favored play. If that’s the case, then Maserati-Alfa would probably be next, with Jeep-Ram to follow.
FCA shares surged in Monday trading, up over 7% to $12.50.
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