Breaking up is a possibility for Fiat Chrysler
Company’s future in flux ahead of CEO’s retirement in 2019
With reports suggesting Jeep could be sold to a Chinese automaker and that Alfa Romeo and Maserati could be spun off, Fiat Chrysler’s future would appear to be in flux.
Fiat Chrysler CEO Sergio Marchionne’s five-year plan is due to come to an end next year, opening possibilities for the future of the automaker.
Among the possibilities is that the company will be broken up.
Alfa Romeo and Maserati could be spun off into a standalone company, as Bloomberg re- ported as a possibility earlier this week. Jeep could be sold, either in part or in its entirety, to a Chinese automaker.
Magneti Marelli, Fiat Chrysler’s parts division, could be sold in part or in its entirety.
Fiat Chrysler could merge with another automaker.
While a Fiat Chrysler spokeswoman declined to comment on the latest reports, Marchionne recently talked about both possibilities. “We have come to the conclusion that the differences in valuation between what we currently achieve as an (automaker) and some of the activities they carry out, including (Magneti) Marelli, no longer justify aggregation,” Marchionne told analysts during a July 27 conference call.
On that same call, George Galliers, an analyst with Evercore ISI, noted that Alfa Romeo and Maserati jointly sell about 250,000 vehicles annually and generate about $14 billion in revenue and asked whether they could operate together as a separate company.
“That sounds like a pretty healthy and respectable standalone OEM (automaker),” Galliers said. Marchionne seemed to agree. “There are no structural, in- dustrial or engineering restrictions for the separation of Alfa and Maserati,” Marchionne said.
But in his next breath, Marchionne said, “That means nothing. Because it does — that’s not an acknowledgment of the fact that either it can be done or would be done.”
Marchionne has never been shy about discussing bold structural changes. He also has made money for shareholders by spinning off Ferrari in 2016 and agricultural equipment-maker CNH Industrial in 2011 into standalone entities.
The urgency surrounding Fiat Chrysler’s future is also rising because Marchionne plans to retire in 2019 and because Marchionne has said he will update investors about the company’s future at an Investors Day conference sometime during the first half of 2018.
“We thought it was ... proper that we sort of update the market again on what we consider to be the next five years of FCA ... from 2018 to 2022,” Marchionne said.
However, Jefferies analyst Philippe Houchois views the prospect of Alfa Romeo and Maserati being spun off separately as a “long shot.”
“The idea of Maserati/Alfa-Romeo independent is growing on us. Still a long shot given recent relaunch, but we see signs that the industry is revisiting the concept of size,” Houchois said.
Meanwhile, the prospect that Fiat Chrysler could sell off pieces of itself has also raised concerns about what would remain and if the automaker could survive without Jeep.
Chinese automaker Great Wall Motor Co. said last week it wants to talk to Fiat Chrysler about Jeep and then reversed course a few days later.