FCAU - Fiat Chrysler Automobiles

[fareastwarriors]

Fiat may have slipped into the driver’s seat. An autoworkers’ fund that owns 41.5 percent of Chrysler has been pushing for an initial public offering of the company as part of talks with its Italian partner. Chrysler’s board has decided to delay the stock sale until next year, suggesting Fiat’s negotiating position has improved.

 

The union probably needs Chrysler to be valued at $18 billion to make a listing worthwhile. Recent price talk has been somewhere around $9 billion to $12 billion, according to The Wall Street Journal. At the top of that range, the United Automobile Workers union fund would end up with $5 billion. That falls short of the $6 billion maximum, including interest, to which it is entitled as part of a 2009 post-bankruptcy agreement.

 

 

Fiat has already laid claim to almost a quarter of the trust’s holdings. Over the past year and a half, it has offered to buy from the union fund three separate 3.3 percent stakes. Remove that combined 10 percent holding, at $600 million, from the I.P.O. equation and the autoworkers’ trust fund would need Chrysler to be worth $17.2 billion to make a public listing for its remaining stake worthwhile — or $18 billion, after factoring in dividends it would no longer earn.

 

Pushing an equity offering into 2014 won’t obviously do much to improve the overall price new buyers would be willing to pay. Chrysler is predominantly a North America-focused company. That market has recovered well, with overall sales close to precrisis levels.

 

Much of the industry’s growth will probably come from Asia and a recovering Europe instead, where Chrysler has little presence. Its pretax margin should improve to 8 percent by 2015, from less than 5 percent, the company’s chief executive, Sergio Marchionne, said. That’s bound to be baked into assumptions already, though.

 

In addition, by January, Fiat will be able to make an offer on yet another 3.3 percent slug. Depending on how those deals are resolved, that would leave just 28 percent of the company available for the I.P.O., thus making it even harder for the trust to push for its desired valuation. A settlement with Fiat is increasingly looking like a better route.

 

 

 

 

 

In Delay of Chrysler I.P.O., Fiat May Have Gained Upper Hand

 

 

 

http://dealbook.nytimes.com/2013/11/25/in-delay-of-chrysler-i-p-o-fiat-may-have-gained-upper-hand/

[phil_Buffett]

Fiat may have slipped into the driver’s seat. An autoworkers’ fund that owns 41.5 percent of Chrysler has been pushing for an initial public offering of the company as part of talks with its Italian partner. Chrysler’s board has decided to delay the stock sale until next year, suggesting Fiat’s negotiating position has improved.

 

The union probably needs Chrysler to be valued at $18 billion to make a listing worthwhile. Recent price talk has been somewhere around $9 billion to $12 billion, according to The Wall Street Journal. At the top of that range, the United Automobile Workers union fund would end up with $5 billion. That falls short of the $6 billion maximum, including interest, to which it is entitled as part of a 2009 post-bankruptcy agreement.

 

 

Fiat has already laid claim to almost a quarter of the trust’s holdings. Over the past year and a half, it has offered to buy from the union fund three separate 3.3 percent stakes. Remove that combined 10 percent holding, at $600 million, from the I.P.O. equation and the autoworkers’ trust fund would need Chrysler to be worth $17.2 billion to make a public listing for its remaining stake worthwhile — or $18 billion, after factoring in dividends it would no longer earn.

 

Pushing an equity offering into 2014 won’t obviously do much to improve the overall price new buyers would be willing to pay. Chrysler is predominantly a North America-focused company. That market has recovered well, with overall sales close to precrisis levels.

 

Much of the industry’s growth will probably come from Asia and a recovering Europe instead, where Chrysler has little presence. Its pretax margin should improve to 8 percent by 2015, from less than 5 percent, the company’s chief executive, Sergio Marchionne, said. That’s bound to be baked into assumptions already, though.

 

In addition, by January, Fiat will be able to make an offer on yet another 3.3 percent slug. Depending on how those deals are resolved, that would leave just 28 percent of the company available for the I.P.O., thus making it even harder for the trust to push for its desired valuation. A settlement with Fiat is increasingly looking like a better route.

 

 

 

 

 

In Delay of Chrysler I.P.O., Fiat May Have Gained Upper Hand

 

 

 

http://dealbook.nytimes.com/2013/11/25/in-delay-of-chrysler-i-p-o-fiat-may-have-gained-upper-hand/

 

a Settlement with fiat is the best choice for the VEBA. They saw the probably Price range from 9-12b$ so they cant argue that in 3 months the Price range will be 15-18b$. it is nonsense. marchionne now it and Play the Cards.

[fareastwarriors]

Fiat's F.MI -1.04% U.S. journey has hit a roadblock. The Italian auto maker had planned an initial public offering of Chrysler Group LLC, in which it owns 58.5%, by year-end. But it said Monday the float would be delayed until the first quarter of next year.

 

Fiat and the United Auto Workers' voluntary employees' beneficiary association, or VEBA, which owns the rest of Chrysler, are effectively using the IPO process to settle their dispute over how much Fiat should pay for its stake.

 

But the delay may provide an opportunity: it's still in Fiat's interest to strike a deal before a float.

 

Both sides could lose should Chrysler actually float. Fiat has warned an IPO would prevent reaping the full benefits of the alliance, which covers areas like shared technology, global distribution and procurement. But the Italian company looks the worse off. A float could mean Fiat ultimately pays a higher price, should new minority investors demand a premium to sell. Chrysler is also stronger on a stand-alone basis than Fiat. The U.S. auto maker is expected to generate €753 million ($1.02 billion) in free cash flow this year, whereas a stand-alone Fiat would see a €1.73 billion cash outflow, estimates Barclays. BARC.LN +0.66%

 

Still, Fiat has allowed an IPO to proceed. That's despite improving investor sentiment around U.S. auto makers, making the VEBA's demands for $5 billion for its Chrysler stake seem more reasonable. It isn't clear what Fiat would pay. But its offer to exercise equity call options, now the subject of a court process, effectively valued the 41.5% Chrysler stake it doesn't already own at $3.18 billion, notes Bernstein Research.

 

A $5 billion price tag would value Chrysler roughly in line with General Motors Co. GM +0.32% It should arguably command a discount: Chrysler's turnaround is impressive but it is still a work in progress. The company's operating profit margin was 4.9% in the third quarter compared with 9.3% margins in GM's North American business. Besides, the VEBA has proposed to float just 16.6% of Chrysler when investors are generally wary of small minority stakes.

 

Both sides are well capable of digging in their heels. But there looks room for negotiation here yet.

 

 

 

 

http://online.wsj.com/news/articles/SB10001424052702304281004579221990542157958?mod=WSJ_Heard_LEFTTopNews

[phil_Buffett]

Fiat and VEBA will settle. it is the best outcome for all parties

[fareastwarriors]

Mr Marchionne may not have all the advantages: In this combined equity and credit

report we explore a number of potential scenarios regarding a Chrysler transaction,

following the VEBA’s instructions to Chrysler to commence an IPO process. The most

simplistic scenario involves a full Fiat-Chrysler merger, with no IPO transaction and no

capital increase. But we also pursue a scenario whereby a potential “Activist investor”

steps in to push an IPO through, thus postponing a full merger. Our third scenario

involves a full merger but financed in part by a capital increase. We look at the potential

impact on both Fiat’s equity and credit valuations under these scenarios, the potential

financing of the acquisition and the likely impact on credit ratings. Our base valuation

for the remaining 41.5% of Chrysler stands at cEUR 3.2bn (USD 4.3bn). Our calculated

maximum outflow under the terms of the Threshold and Equity Option Agreements is

EUR 3.91 (USD 5.1bn).

 

 

see attached

Barclays_Fiat_SpA_Potential_Merger_Derailment.pdf

[muscleman]

Mr Marchionne may not have all the advantages: In this combined equity and credit

report we explore a number of potential scenarios regarding a Chrysler transaction,

following the VEBA’s instructions to Chrysler to commence an IPO process. The most

simplistic scenario involves a full Fiat-Chrysler merger, with no IPO transaction and no

capital increase. But we also pursue a scenario whereby a potential “Activist investor”

steps in to push an IPO through, thus postponing a full merger. Our third scenario

involves a full merger but financed in part by a capital increase. We look at the potential

impact on both Fiat’s equity and credit valuations under these scenarios, the potential

financing of the acquisition and the likely impact on credit ratings. Our base valuation

for the remaining 41.5% of Chrysler stands at cEUR 3.2bn (USD 4.3bn). Our calculated

maximum outflow under the terms of the Threshold and Equity Option Agreements is

EUR 3.91 (USD 5.1bn).

 

 

see attached

 

The date is 17 October 2013. I thought it is something new. :)

[Guest hellsten]

Mr Marchionne may not have all the advantages: In this combined equity and credit

report we explore a number of potential scenarios regarding a Chrysler transaction,

following the VEBA’s instructions to Chrysler to commence an IPO process. The most

simplistic scenario involves a full Fiat-Chrysler merger, with no IPO transaction and no

capital increase. But we also pursue a scenario whereby a potential “Activist investor”

steps in to push an IPO through, thus postponing a full merger. Our third scenario

involves a full merger but financed in part by a capital increase. We look at the potential

impact on both Fiat’s equity and credit valuations under these scenarios, the potential

financing of the acquisition and the likely impact on credit ratings. Our base valuation

for the remaining 41.5% of Chrysler stands at cEUR 3.2bn (USD 4.3bn). Our calculated

maximum outflow under the terms of the Threshold and Equity Option Agreements is

EUR 3.91 (USD 5.1bn).

 

 

see attached

 

Thanks.

 

Why Underweight? Fiat’s difficulties in its core business look unlikely to improve in 2013 and capacity takeout in Italy now seems unlikely given current plans. We believe full Chrysler ownership is unlikely in the near term, with uncertainty over whether the resources are available, and resolution of the VEBA situation still out of sight. We remain Underweight.

 

Funny how short their investment horizon is. Oh sorry, I forgot they're not investors…

[skanjete]

I really can't understand how they can produce a report of 77 pages and then conclude that Fiat is overvalued.

If you take their own valuation for Chrysler, and multiply with the 58,5% stake of Fiat, you already have a share price that's higher than the current share of Fiat.

 

According to the report, the value of the Fiat-ex Chrysler stake is less than zero??

[phil_Buffett]

I really can't understand how they can produce a report of 77 pages and then conclude that Fiat is overvalued.

If you take their own valuation for Chrysler, and multiply with the 58,5% stake of Fiat, you already have a share price that's higher than the current share of Fiat.

 

According to the report, the value of the Fiat-ex Chrysler stake is less than zero??

 

Mr Marchionne may not have all the advantages: In this combined equity and credit

report we explore a number of potential scenarios regarding a Chrysler transaction,

following the VEBA’s instructions to Chrysler to commence an IPO process. The most

simplistic scenario involves a full Fiat-Chrysler merger, with no IPO transaction and no

capital increase. But we also pursue a scenario whereby a potential “Activist investor”

steps in to push an IPO through, thus postponing a full merger. Our third scenario

involves a full merger but financed in part by a capital increase. We look at the potential

impact on both Fiat’s equity and credit valuations under these scenarios, the potential

financing of the acquisition and the likely impact on credit ratings. Our base valuation

for the remaining 41.5% of Chrysler stands at cEUR 3.2bn (USD 4.3bn). Our calculated

maximum outflow under the terms of the Threshold and Equity Option Agreements is

EUR 3.91 (USD 5.1bn).

 

 

see attached

 

Thanks.

 

Why Underweight? Fiat’s difficulties in its core business look unlikely to improve in 2013 and capacity takeout in Italy now seems unlikely given current plans. We believe full Chrysler ownership is unlikely in the near term, with uncertainty over whether the resources are available, and resolution of the VEBA situation still out of sight. We remain Underweight.

 

Funny how short their investment horizon is. Oh sorry, I forgot they're not investors…

 

it is very funny how they argue that fiat is overvalued. and because of fiat not own chrysler may the next 3months it is a absolutely sell.

 

Ferrari is worth nothing, you have to notice their best time is over.

Maserati is like Opel

And Fiat is also nothing worth.

 

HAHA. i love such articles. It was good for me that so much negativity was around, so that i can build my stake.

when Fiat owns Chrysler complet the start roaring the machine. Ferrari, Maserati, Alfa, Fiat and Chrysler. i love all the brands and if the can achieve almost the earning multiples from Ford or gm, the fiat Group is much undervalued. ferrari is alone worth 5,5€-6€ per share.

 

by the way. i remember when bac was 2 years ago at 5$ i put 30% into it. there was so much negative News, articles, opinions. it was amazing. such a Feeling, it was not normal. every day pure dramatic. and then a few months later bac rising higher and higher, and all the negative articles and analysts swing to more neutral or positive.

[skanjete]

In fact, everything about the report suggest that Fiat is undervalued.

 

The maximum that Fiat has to pay VEBA is 3,9€bn. The report values the same stake at anything between 3,9 and 7,8€bn. So if Sergio tomorrow pays the maximum, he instantly creates value of something between 0-3,9€bn, all according to the report.

[jay21]

I think the worry in the report is a capital raise.

 

I just don't see it.  I would think they can even do some type of bridge financing to get the deal done and upstream some cash from Chrysler to pay off the debt or borrow at Chrysler to pay off some debt.  Anyone have a different view or any insight?

[racemize]

There's also the possibility that Exor helps out on it.  Not sure how feasible/likely that is though.

[skanjete]

Why not use the excess liquidity within Chrysler?

 

They can't do it immediately since they are limited by the covenants of the 2 bonds (19 and 21 I think) to extract the cash. But the report clearly states how that can be solved.

 

After refinancing the 2 bonds they could use the liquidity within Chrysler. Actually, the longer they wait, the higher the pressure on the VEBA (deadline is dec 14) to do a deal and the higher the liquidity in Chrysler that can be used to finance the deal.

 

 

[racemize]

On page 48 of the Barclays report, what does the other/eliminations and adjustment line items come from?  I don't see that explained.

 

I guess looking at that Sum of Parts, they value everything that isn't Chrysler at < 0 based on the debt.  Basically no improvements seem to be accounted for.

 

 

[fareastwarriors]

Analyst Note 11/25/2013

 

Best Idea Fiat announced Monday that Chrysler Group's board "has determined that it will not be practicable for Chrysler Group to launch and complete an initial public offering prior to the end of 2013." In our opinion, the selling shareholder (United Auto Workers' voluntary employees' beneficiary association) was disappointed by the valuation it was given by the bankers and delayed the IPO. Our Fiat fair value estimate assumes that Fiat purchases all the remaining Chrysler equity held by the VEBA by the middle of 2014 at price of $4.2 billion, or about EUR 3.0 billion. To move our Fiat fair value estimate by EUR 1, the price for Chrysler would have to change by EUR 1.0 billion, or nearly $1.4 billion. If no-moat Fiat never buys the rest of Chrysler and we assume over our five-year forecast there are no dividends paid by Chrysler to its shareholders, our Fiat fair value estimate would be around EUR 9, representing about a 50% increase from the stock's current level.

 

We have estimated the value of the shares held by the UAW-managed Chrysler employee VEBA trust at about $4.2 billion. This values Chrysler's total equity at around $10.0 billion and the entire enterprise at roughly $22 billion. Last week, media reports quoted sources close to Chrysler as saying that the IPO price range would value Chrysler total equity at $9 billion-$16 billion, with the most likely outcome around $10 billion, directly in line with our valuation. The price range came after reports that the UAW had added four more bankers to the IPO underwriters, which we interpreted as meaning that demand among the original underwriters was not high enough. However, the UAW has publicly stated that it expected to get at least $5.0 billion for its stake, valuing the Chrysler equity at more than $12 billion. Further complicating the market for the UAW's stake, if the IPO had been launched during this quarter, it would have been competing with the U.S. Treasury's sale of General Motors shares.

 

FIAT_morningstar.pdf

[LC]

Thanks fareast

[nikhil25]

Chrysler to introduce small Ram commercial van in North America

http://www.autoblog.com/2013/12/02/ram-promaster-city-fiat-doblo/

[brker_guy]

 

http://www.autonews.com/article/20131202/OEM01/312029919/marchionne-will-unveil-4th-relaunch-plan-for-struggling-alfa?cciid=email-autonews-daily&r=2994C8377578D8V#axzz2mO2CoudA

 

http://www.autonews.com/article/20131202/OEM01/312029918/alfas-revised-plan-focuses-on-new-rwd-awd-architecture?cciid=email-autonews-daily&r=2994C8377578D8V#axzz2mO2CoudA

 

 

[skanjete]

November was good for Chrysler :

http://finance.yahoo.com/news/chryslers-november-sales-rise-16-131205243.html

[jay21]

November was good for Chrysler :

http://finance.yahoo.com/news/chryslers-november-sales-rise-16-131205243.html

 

A low content anecdote, but my two most memorable scenes in media that I have seen recently both involved Chrysler vehicles:

 

1. Walt buying new cars in Breaking Bad

2. The chase scene in Drive

 

I hope everyone else is seeing the new Chrysler cars as cool.

[jch548]

Don't forget Koslowski in The Vanishing Point!

[Guest hellsten]

Don't forget Koslowski in The Vanishing Point!

 

In Man of Steel a Sears store was destroyed by aliens. Maybe Lampert is sending us subtle hints about SHLD's future ;D

[fareastwarriors]

Hopefully the auto companies are not going back to their old ways...I also read another article about the loosening of financing...

 

 

Inventory climbed to almost 3.4 million cars and light trucks entering November, according to industry data provider WardsAuto. At 76 days’ supply, that was the highest for the month since 2005.

 

 

 

http://www.bloomberg.com/news/2013-12-02/most-autos-on-u-s-lots-since-05-has-ford-leading-cuts.html

 

 

Most Autos on U.S. Lots Since ’05 Has Ford Leading Cuts

 

 

 

 

[brker_guy]

Fiat Said Near Deal to Start Jeep SUV Production in China

 

http://www.bloomberg.com/news/2013-12-03/fiat-said-near-deal-to-make-jeeps-in-china-with-plant-compromise.html?cmpid=yhoo

 

 

[fareastwarriors]

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