FCA CEO: No plans to sell brands to Chinese
Jeep expected to drive future profits
DETROIT: Fiat Chrysler Automobiles NV’s (FCA) had no intention of breaking up the company or selling individual brands to China or other parties, the company’s chief executive officer said on Monday, adding that the group was counting on its coveted Jeep brand to drive future profits.
“We’re not going to break up anything,” Sergio Marchionne said at a news conference at the North American International Auto Show. “We have no intention of breaking it up and giving anything to the Chinese.”
He said the Jeep sport utility vehicle brand could help FCA double its net profit. FCA’s portfolio also includes luxury Maseratis, sporty Alfa Romeos and tiny Fiats.
FCA’s share price has jumped more than 30% this year on a bullish outlook for the auto sector, Jeep growth expectations and speculation that Marchionne’s final year at the helm could prompt strategic deals such as spin-offs, technology alliances and disposals.
The popularity of the Jeep brand, which is targeting sales of two million vehicles this year, has prompted talk it could be spun off from the group, as happened with tractor maker CNH Industrial and supercar group Ferrari, or sold off.
Rumours have resurfaced that Guangzhou Automobile Group Co Ltd might be interested in snapping up part of FCA.
Marchionne said on Monday that while GAC has partnered to deliver Jeeps to the Chinese market and FCA is talking to the Chinese automaker about helping it enter the US market “none of these things are designed to impact on the independence of FCA.”
FCA has often been the subject of merger speculation, especially after its unsuccessful 2015 attempt to tie up with larger US rival General Motors Co.
Its share price jumped to record highs in August after reports of interest from China’s Great Wall Motor Co and South Korea’s Hyundai Motor Co.
Marchionne said while both Jeep and truck brand Ram are strong enough to exist on their own, “we need to talk about... what will be left behind.”
He said he has recommended to the company’s board that the automaker spin off Magneti Marelli, a maker of components for lighting, engines, electronics, suspension and exhausts, to shareholders by the end of 2018.
Marchionne confirmed FCA’s targets for 2017 and for 2018, including a plan to erase all debt and generate up to £5 billion ($6.14 billion) in net cash.
Asked about the possibility of paying dividends, he said the markets had changed and “it makes more sense to buy back shares than pay a dividend.”
The 65-year-old executive is due to step down in early 2019, and a successor will be appointed from within FCA.
Finance chief Richard Palmer, European head Alfredo Altavilla and Jeep boss Mike Manley have often been cited as possible candidates, according to sources close to the company.
“There are other possible candidates who are not in the media spotlight,’’ Marchionne said.
FCA announced last week that it would shift production of Ram heavy-duty pickup trucks from Mexico to Michigan in 2020, a move that lowers the risk to the automaker’s profit should President Donald Trump pull the United States out of the North American Free Trade Agreement.
“I think we’ve done the right thing by the American market, by the U.S. consumer,” Marchionne said, “... and I think we’ve addressed Mexican concerns about production with plans to repurpose the company’s Saltillo, Mexico, plant to build commercial vehicles for sale globally.’’
He said the US tax code overhaul passed in December would provide a $1 billion boost to the company in 2018, noting that the overhaul “was to make sure the economy got a boost... develop a sense of confidence about the future, and that’s exactly what we as an automaker in the US were waiting to hear.”
A number of major automakers plan vast investments in developing electric vehicles. Ford Motor Co said on Sunday that it planned to invest $11 billion and have 40 hybrid and fully electric vehicles in its model lineup by 2022.
Marchionne said electric vehicles would eventually form a large part of vehicle lineups, “but it’s a lot further off than people think in part because they are not profitable for automakers.’’