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6/1/2018

Automotive News Europe

FCA CAPITAL MARKETS DAY

Marchionne dons tie, claims victory in Fiat Chrysler debt pledge Tommaso Ebhardt Automotive News Europe | June 1, 2018 10:33 CET BALOCCO, Italy -- Fiat Chrysler Automobiles CEO Sergio Marchionne kicked off his final strategic road map presentation for the Italian-American automaker on Friday, and he didn’t disappoint. Appearing onstage at the Balocco test track near Turin, the CEO first took a victory lap, recounting his accomplishments in saving Fiat SpA from bankruptcy in the mid-2000s and following that up with the rescue of Chrysler five years later. Then he unzipped a nondescript black sweater and, paraphrasing Oscar Wilde, revealed an “arguably well tied” blue tie. With that, Marchionne declared victory in one of Fiat Chrysler’s long-held and most ambitious goals -- to become net cash positive this year. “I expect that when we close the books at the end of June, we will report a net industrial cash position,” he said. The event marks 14 years to the day since Marchionne took the helm at a struggling Fiat SpA on June 1, 2004. His concluding task on Friday is to offer investors a compelling vision for the company that will endure once he’s left the stage. Marchionne, hired in the dramatic hours after the death of Chairman Umberto Agnelli when Fiat was on the brink of bankruptcy, returns to the place where, in July 2004, he presented his survival plan for the manufacturer. One optimistic sign for shareholders: At the event in Balocco, Fiat Chrysler has handed out candy boxes inscribed: “Net cash: How sweet it is.” The show’s about to begin. Fiat’s value has increased by more than 10 times during Marchionne’s tenure. The stock rose 3.1 percent to 19.99 euros as of 9:38 a.m. in Milan. That would mark a record high, based on closing prices. Marchionne choreographs these events well, and Friday’s will be no exception. In the buildup to June 1, the 65-year-old executive -- known for wearing his trademark sweaters -- has promised to wear a tie onstage if he’s ready to declare victory in his bid to rid Fiat Chrysler of net industrial debt. He’s also said that doubling profit in the next five years is possible as the carmaker exploits the potential of the Jeep brand. On Thursday, Fiat Chrysler gave some shape to its bare-bones autonomous-vehicle strategy, inking an expanded partnership with Google’s Waymo to outfit 62,000 hybrid-electric Chrysler Pacifica minivans with self-driving gear. Here are some of the areas where investors will be looking for Fiat Chrysler to fill in some outlines of its strategy: More Jeep, less Fiat and Chrysler http://europe.autonews.com/article/20180601/ANE/180609985?template=printartANE

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Marchionne has already signaled that Fiat’s future rests on upscale brands that can command a price premium: Jeep SUVs, Ram pickup trucks, Alfa Romeo and Maserati sports cars and crossovers. As a consequence, Fiat Chrysler plans to downsize its namesake brands, people familiar with the matter said this week. The company is considering ending sales of Fiat cars in North America and China in the coming years, while mostly confining Chrysler to the U.S., the people said. As part of the shift, Fiat plans to end mass-market carmaking in Italy -- halting production of the Mito and Punto models, and moving assembly of the subcompact Panda to lower-cost Poland. Alfa Romeo and Maserati The carmaker is also considering combining Alfa Romeo and Maserati into a single division in Fiat’s financial reports, people familiar with the matter have said. Bringing the upscale Italian brands together would be seen by investors as a first step toward an eventual spinoff -- a move that would mirror the highly successful public offering of supercar maker Ferrari NV in 2015 and the earlier spinoff of truck and tractor maker CNH Industrial NV. Magneti Marelli plans Investors are waiting to get details on the separation of parts producer Magneti Marelli from the automobile-manufacturing business. The move will create value for Fiat Chrysler shareholders and allow it to focus on carmaking, while giving Marelli the flexibility to pursue growth, Marchionne said in April when the decision was approved. Like automakers, component manufacturers are contending with a monumental shift toward electric and self-driving cars, which holds promise for parts of their portfolio, and peril in other areas. Electric push While most of the world’s major carmakers have put forth detailed plans for electrifying their model lineups, Fiat Chrysler has only given a vague outline. Marchionne has said he expects that by 2025, fewer than half the cars sold will be be fully combustion-powered, as gas and diesel give way to hybrid, electric and fuel-cell drivetrains. Friday’s strategy session should fill in the blanks -- Fiat Chrysler will tell investors how it will embrace new technology, hopefully with model-introduction specifics. U.S. finance unit An agenda for Friday’s presentation that was posted online but then removed included an item on U.S. consumer-finance operations, according to Automotive News. The automaker is considering its own captive finance unit in the U.S., along the lines of arrangements at American competitors, people familiar with the business plan said this week. That sent the stock of Santander Consumer USA Holdings Inc., Fiat Chrysler’s current finance partner, down by the most in almost two years on Wednesday. Profit, debt Marchionne in the past has set audacious targets for Fiat Chrysler, at times prompting analyst skepticism. Mostly, he’s proved doubters wrong. Later Friday, after the brand presentations, Fiat Chrysler will reveal new financial goals through 2022. Marchionne said in January he expects a Jeep-focused Fiat Chrysler to be able to double profit in five years. The biggest remaining performance goal has been a pledge for Fiat Chrysler to free itself of net industrial debt this year. Hitting his target would signal that the carmaker has pulled back from the brink and is ready to weather the next crisis. (One remaining hurdle is an ongoing U.S. investigation into possible diesel-emissions cheating, which could produce hefty fines and settlements.) Being debt-free would also set the stage for a dividend policy, which could lift the stock price. Chairman John Elkann, the head of the Agnelli family that controls Fiat Chrysler, has a necktie for Marchionne waiting in his drawer. Succession http://europe.autonews.com/article/20180601/ANE/180609985?template=printartANE

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Perhaps the biggest question for investors is who will pick up the baton after Marchionne is gone. The CEO, is one of the longest serving in the auto industry, is leaving at a time of great transition. Chairman Elkann has said the new chief will be chosen among Marchionne’s closest aides. Chief Financial Officer Richard Palmer, Europe head Alfredo Altavilla and Jeep chief Mike Manley are seen as the leading candidates. Barring an announcement of a successor, investors will be paying attention to see which of the three gets more time on stage, or any other signals during the seven-hour-long presentation. Palmer and Manley are expected to speak about financial targets and Jeep, while Altavilla may not get the spotlight.

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