FCAU - Fiat Chrysler Automobiles

[PlanMaestro]

Not at the beginning

 

http://www.businessweek.com/stories/2005-03-13/hot-audi

[Kiltacular]

Chrysler, Fiat ~ VW

Alfa ~ Audi

Maserati ~ Porsche

Ferrari > Lambo

Not at the beginning

 

http://www.businessweek.com/stories/2005-03-13/hot-audi

 

Very clever!  Thanks

 

 

[Phaceliacapital]

I don't think Marchionne necessarily agrees with you PM, on the analyst day he considers Alfa Romeo competing with just two brands, and I think he meant BMW and Mercedes.

 

I took some notes btw, happy to share:

 

Fiat notes:

• What if end markets do not perform?

“Easy” to reduce targeted capital expenditures, just like they did in EU. When they did this in the EU this was not at all well received. In hindsight however, those players that did commit their capital were the ones ending up asking for additional capital from third parties.

Considers NAFTA region plan the most difficult to exercise (Jeep considered most safe).

Over the past years, both powertrain and the platform architecture have been developed into a foundation that should support market share gains and increased efficiency in the coming years.

SM is “relatively comfortable” that goals are achievable.

• On wages:

Tier 2 wage structures are unsustainable. Real problem is to freeze Tier 1 and make them a “dying class”. Tier 2 should reflect the sharing in the economics of the company.

• On Architectures:

WCM negative as a lot of sales

Families 15 to 12 – Certain legacy architecture (Fiat 500) which you cannot consolidate and keep going on. Others you can migrate to core architectures. All in all, 70% of volume should be produced on the four largest platforms.

• On usage of aluminium:

There is better usage of aluminum than just putting it into pickup trucks. Tremendous amount of loyalty in the pick up trucks. Currently resonating with the more younger population. As they see it, getting more younger population and starting to convert GM’s loyalists. Their numbers show that clients have become younger and richer.

• Environment for Pickups?

Not concerned about capacity chasing demand. In recent quarters, trucks increased profit margin, sales and share, which is not that bad.

• On Latam:

10% trading profit margin achievable? Plant can make 800k a year, spits out a car every 20 seconds. Cost efficiency is also associated with this scale, and there is a 300bp difference with nearest competitors. Remained positive despite the fact that VW & GM have started to bleed. Reduced production  reduced inventory levels at dealers for these two.

Hockey stick is blended result of production structure. The business plan does not incorporate pre 2013 margin levels. Pernambucco has to be industrialised the fastest possible. As many cars as they can in the ST.

• Italian plants:

Used to deal with Italian markets in A, B and sometimes C segment, but will now be utilized for alfa’s, maserati’s and jeeps. Change in net exposure to EUR? Flat rates in plan but longer exposure in USD and CNY. There is no miraculous recovery in the European market..

SM personal’s view is “there is no rational argument for the EUR trading this high”

• How to tackle EU segment?

NO additional brand. Execution of dual brand strategy with lowest cost. Brands are precious things.

• EBIT targets way below Ford & GM, why?

Mostly due to trucks in the mix.

• Leverage? No cash generation so …. Raise equity? Why should I own the debt?

1. The plan doesn’t include it, but it is possible.

2. Fiat still has CNHI worth of EUR 600 mn. Probably monetized. Treasury stock used as new exchange shares in NYSE.

3. Raising equity at current market prices is NOT allowable. Mandatory convertibles are a different discussion.  But never before US listing and NL incorporation.

 

• Why not a midsize pickup truck?

Will have one in Latam. But the bigger question is whether NAFTA needs it? After 5 years still unclear. Jeep can do many things other brands can’t.

• On car loans and their creditworthiness?

“You can sleep in your car, but not drive your house”.

• Alfa LT?

01:41. Expect to get double digit margins. 7bn investment. First safety valve, if the car is ready 2015. Not good, game over.

Would you do it if you hadn’t the additional capacity to deal with?

Would still do this despite the capacity. Would invest into a greenfield to develop Alfa. Brand has everything to compete. Wants to compete in the real premium market. Are not going for “hybrid” in terms of value & luxury (not engine wise). Alfa is designed to compete with BMW & Mercedes.

Nissan GTR is a car “technically”, best price/quality BUT will never sell as a real brand in the marketplace.

• Q1 one/offs, no Chrysler 100’s in the volume, unusual recalls. EUR 100m.

• Targeted rating for FCA?

Refi maturities on the Fiat side

2016 deleveraging because cost will be much lower due to decreasing cost of redemption of Chrysler. Refinance in 2016 at the senior level. Try to achieve investment grade by the end of the plan..

• Capital structure?

Billion of generation due to WCM.

What is the right capital structure? There is too much cash in the automotive section. Markets are just beginning to stabilize, not late cycle at all. Less than 50% probability that optimal cycle occurs. Not uncomfortable with 5 bn debt.

Prudent thing to do is a manda convertible

• If there is a strong likelihood that plan can be achieved you would be reluctant to engage in equity linked capital raising. If a PE did the same thing, the leverage would be much greater.

• Normalized recall costs NAFTA  should not be normal.

Please disconnect Argentine from Brazil, totally different markets. Brazil is key market, Argentine is not important in the plan. Volumes Brazil should hold.

• Breakeven levels of the group:

NAFTA – 1.5 mn, a lot of flexibility with shifts, R&D & CAPEX. EMEA – 1.3 mn. LatAm – Very lean cost structure, more competitive than anyone else, 650k - 700k (SM: 550 – 600k) (they have one factory). APAC – breakeven not an issue.

 Incentive plan tied to the plan’s incentives.

• 5 aspects:

- Premium brand strategy (Maserati earned more in Q1 than previous FYs)

o Global business model to resolve issue of overcapacity

- Mass market EU and the role there. Continue path of caution and no intention to engage in mass market suicidal capex.

o Biggest source of growth mass market will be latam and asia

- Jeep

o First time that volume goals have been clearly stated

o Believe in the brand as a global brand, FY sales should break 1 mn unit mark

- FCA total volume

o Economies of scale have to be large enough to warrant capex, 6 mn units.

 

After the analyst conference I was a lot more at ease with FCA's targets. I thought SM's comments on Alfa were "comforting".

 

I think the Alfa plan is doable, but execution is very very much key, you have to believe in a EMEA recovery, in good EM markets demand, a succesful globalisation of Jeep so FCA has the cash to fund Alfa (or at least does not have to pour extra cash into the former initiatives).

 

Also interesting is that Marchionne mentioned that if a PE firm would be doing something similar that the company would be leveraged up a lot more..

[Palantir]

Not at the beginning

 

http://www.businessweek.com/stories/2005-03-13/hot-audi

Not quite, that is very different from where Alfa is now. Audi had a number of great higher end cars and were steadily taking aim at BMW. Alfa's cars look like toys and are hardly competitive against Audi, and in the future as Maserati moves downmarket, it will start running into Audi. (Sort of like Porsche is)

[fareastwarriors]

Maserati, VW Lead Foreign Cars Making Inroads in Japan

 

 

http://www.bloomberg.com/news/2014-05-11/maserati-vw-lead-foreign-cars-making-inroads-in-japan.html

[racemize]

In the presentation, SM said one of his competitor's numbers would "scare the jesus out of him" if he were running it.  I wasn't sure who he was referring to--did anyone catch it?

[peter1234]

@Phaceliacapital

 

Thank you for sharing your notes!

 

:) :) :)

[GregS]

I think Sergio put Audi on notice.

 

[Avyalake]

I still don't get why Marchionne put every detail out there? Is it the expectation of a forced public commitment playing out through his team?

http://www.autonews.com/article/20140512/OEM02/305129949

[Grenville]

I don't think Marchionne necessarily agrees with you PM, on the analyst day he considers Alfa Romeo competing with just two brands, and I think he meant BMW and Mercedes.

 

I took some notes btw, happy to share:

 

 

Is there a webcast recording of the entire investor day available? I was only able to find a webcast of the end of day results release.

[Phaceliacapital]

The Marchionne Way is the anti-auto CEO

 

Grenville, not that I know of..

[yadayada]

I read that hyundai preferreds are basicly trading at a PE of 2 if you discount cash and all equity investments of hte company. That seems waaay cheaper then fiat?

[Grenville]

The Marchionne Way is the anti-auto CEO

 

Grenville, not that I know of..

 

Thanks!

[Yours Truly]

Timber....... we're back into the 9's after a brief run into the 11's... buying opportunity anyone?

[karthikpm]

Does anyone have the latest analyst report from Merrill Lynch on FIATY?

 

what is the case if there is a big economic slowdown ? Is there a margin of safety at this price?

 

Thoughts?

[plato1976]

Maybe, Hyundai preferred may be the cheapest auto stock, followed by Fiat;

 

GM is more exp than these two, but may be the safest?

 

I read that hyundai preferreds are basicly trading at a PE of 2 if you discount cash and all equity investments of hte company. That seems waaay cheaper then fiat?

[yadayada]

Seems that safety is probably more in numbers here? Since none of these company's have rock solid moats. If Hyundai trades to where Fiat is now, you would make 200%. They also have less leverage?

 

http://knowledge.wharton.upenn.edu/article/how-hyundai-sells-more-when-everyone-else-is-selling-less/

 

Seems GM is largest, then Hyundai and then Fiat chrysler. But Hyundai has the largest net cash position compared to their market cap? THey also hold investments at cost that are worth more now. They have the highest profit margins of the three (almost 10% vs Gm's 2-3%) and seems somewhat stable. ANd you get this much cheaper then GM or Fiat. Is there some big risk with Hyundai that I am not aware of? THere are also some catalysts for Hyundai that could be v positive to minority shareholders that relate to laws being changed in Korea.

[PB]

Auto Companies with Sergio.

 

Auto Companies without Sergio.

[fareastwarriors]

Seems that safety is probably more in numbers here? Since none of these company's have rock solid moats. If Hyundai trades to where Fiat is now, you would make 200%. They also have less leverage?

 

http://knowledge.wharton.upenn.edu/article/how-hyundai-sells-more-when-everyone-else-is-selling-less/

 

Seems GM is largest, then Hyundai and then Fiat chrysler. But Hyundai has the largest net cash position compared to their market cap? THey also hold investments at cost that are worth more now. They have the highest profit margins of the three (almost 10% vs Gm's 2-3%) and seems somewhat stable. ANd you get this much cheaper then GM or Fiat. Is there some big risk with Hyundai that I am not aware of? THere are also some catalysts for Hyundai that could be v positive to minority shareholders that relate to laws being changed in Korea.

 

It is not the easiest for U.S. shareholders to buy Korean equities but it's not impossible but still... 

[yadayada]

Auto Companies with Sergio.

 

Auto Companies without Sergio.

lol you paid 20$ to just say that.

[PB]

 

lol you paid 20$ to just say that.

 

You can check my registration date if you like.

 

Point being one company has excellent management and the others main advantage has been slipping away.

[fareastwarriors]

Fiat Chrysler Will Be OK if It Misses Lofty Targets: Marchionne

 

 

 

http://www.nytimes.com/reuters/2014/05/13/business/13reuters-fiat-chrysler-markets.html?src=busln

[yadayada]

To all of that, someone in the back of the room might have said, “Far out, man.” One doesn’t quite know how seriously to take this shoot-the-moon blueprint. After calling his handiwork “a courageous plan,” Marchionne covered himself: Success, he said, will require “nearly perfect execution across a variety of brands.” Like the mating of unicorns, this near perfection is often spoken of but has never been sighted.

http://www.thestar.com/business/2014/05/09/sergio_marchionnes_too_audacious_plan.html

 

Ill be waiting for the sell offs of ferrari and jeeps spin offs to buy :D

 

On a more serious note, how does he plan to achieve this? It doesnt seem by being the dirt cheap low cost provider? So how will he differentiate those brands this well to come close to those amazing targets?

[muscleman]

To all of that, someone in the back of the room might have said, “Far out, man.” One doesn’t quite know how seriously to take this shoot-the-moon blueprint. After calling his handiwork “a courageous plan,” Marchionne covered himself: Success, he said, will require “nearly perfect execution across a variety of brands.” Like the mating of unicorns, this near perfection is often spoken of but has never been sighted.

http://www.thestar.com/business/2014/05/09/sergio_marchionnes_too_audacious_plan.html

 

Ill be waiting for the sell offs of ferrari and jeeps spin offs to buy :D

 

On a more serious note, how does he plan to achieve this? It doesnt seem by being the dirt cheap low cost provider? So how will he differentiate those brands this well to come close to those amazing targets?

 

BMW and Benz are not low cost producers either. Fiat's plan to go upscale will work if it can make nice cars that are priced comparative to BMW and Benz.

[jm25]

Stock down big time last 2 days... anyone loading up on more?