FCAU - Fiat Chrysler Automobiles

[muscleman]

http://www.valuewalk.com/2014/09/steven-wood-greenwood-investors-long-fiat-video/

 

This vignette of  Steven Wood of GreenWood Investors offers an investment lesson on the importance of capital allocation by comparing Fiat and Volkswagen

 

Could anyone please help me understand the terms "invested capital", "debt adjusted invested capital" and ROOIC in this presentation?

[dowfin1]

I had trouble getting the same figures as Greenwood, but I came close so here is what I think it is.

 

Invested capital consists of PPE and current assets, less cash and current financial assets.  In other words the actual operating assets needed to produce cars (except the cash).

 

DAIC subtracts the net debt (debt less cash and current financial assets). 

 

ROOIC is the 19.7 ROIC times 1/.31.  I think this the represents owners' economic cash flow return. 

 

Hope this helps.   

[Grenville]

Good article on Ram in the NYT:

 

"Five Years Later, Chrysler’s Gamble on Ram Trucks Is Paying Off"

http://www.nytimes.com/2014/09/18/business/ram-trucks-gain-on-their-detroit-rivals.html?partner=yahoofinance

[merkhet]

Good article on Ram in the NYT:

 

"Five Years Later, Chrysler’s Gamble on Ram Trucks Is Paying Off"

http://www.nytimes.com/2014/09/18/business/ram-trucks-gain-on-their-detroit-rivals.html?partner=yahoofinance

 

Great article.

 

In 2009, when Ram was carved out from Dodge into a stand-alone division, it was a big gamble — and far from a sure thing. Some industry critics scoffed at the idea of a brand dedicated to pickup trucks. Others were puzzled: After the bailouts, the trend was to consolidate brands to streamline automakers’ offerings, but Chrysler was adding a new one.

 

When people say that Marchionne doesn't know how to run a car company, I think that they don't know what the hell they're talking about. Perhaps they mean that he doesn't know how to run a car company the way that people are used to having a car company run. And I'd agree. And I'd be happy about that.

[muscleman]

Good article on Ram in the NYT:

 

"Five Years Later, Chrysler’s Gamble on Ram Trucks Is Paying Off"

http://www.nytimes.com/2014/09/18/business/ram-trucks-gain-on-their-detroit-rivals.html?partner=yahoofinance

 

Great article.

 

In 2009, when Ram was carved out from Dodge into a stand-alone division, it was a big gamble — and far from a sure thing. Some industry critics scoffed at the idea of a brand dedicated to pickup trucks. Others were puzzled: After the bailouts, the trend was to consolidate brands to streamline automakers’ offerings, but Chrysler was adding a new one.

 

When people say that Marchionne doesn't know how to run a car company, I think that they don't know what the hell they're talking about. Perhaps they mean that he doesn't know how to run a car company the way that people are used to having a car company run. And I'd agree. And I'd be happy about that.

 

I've been reading the "Outsiders" through Audible. I feel like Marchionne deserve a space there too. :)

[brker_guy]

 

Ferrari's Ousted Chairman Was Right

 

http://jalopnik.com/ferraris-ousted-chairman-was-right-1636474292

[LC]

When Fiat Chrysler unveiled their five-year plan in May, the main thrust of the Ferrari presentation was very clear: "Ferrari is not for sale." No, nobody was asking if it was, but that's what you have to say when you're that valuable.

 

Uh, tons of investors were. The enthusiast author is simply not looking at the entire landscape.

 

Post from the comment section, which I agree with:

 

The other side of the coin is that Ferrari could still charge a crazy amount for a car and still sell over 10000 a year. Does this make Ferrari less exclusive, no not really. Its not the limitation of the cars, it's the price that makes the Ferrari a Ferrari. Its the same with Cadillac and Chevy, people spend money "because Cadillac" not because it is in some way far superior to the Chevy equivalent.

 

It comes down to the quote from a movie who's name I cannot remember. Some people like to pay 10 bucks for a carved statue and some people like to pay 20 for the same thing when they are in fact identical but the person who spent 20 think theirs is something special. Building more Ferrari's will not make the brand less exclusive and it may help them save for the next rainy day.

 

3,000 more Ferrari's worldwide will not dilute the brand. Most people won't even notice an increase of them on the road and will still go on buying Ferrari swag.

[phil_Buffett]

When Fiat Chrysler unveiled their five-year plan in May, the main thrust of the Ferrari presentation was very clear: "Ferrari is not for sale." No, nobody was asking if it was, but that's what you have to say when you're that valuable.

 

Uh, tons of investors were. The enthusiast author is simply not looking at the entire landscape.

 

Post from the comment section, which I agree with:

 

The other side of the coin is that Ferrari could still charge a crazy amount for a car and still sell over 10000 a year. Does this make Ferrari less exclusive, no not really. Its not the limitation of the cars, it's the price that makes the Ferrari a Ferrari. Its the same with Cadillac and Chevy, people spend money "because Cadillac" not because it is in some way far superior to the Chevy equivalent.

 

It comes down to the quote from a movie who's name I cannot remember. Some people like to pay 10 bucks for a carved statue and some people like to pay 20 for the same thing when they are in fact identical but the person who spent 20 think theirs is something special. Building more Ferrari's will not make the brand less exclusive and it may help them save for the next rainy day.

 

3,000 more Ferrari's worldwide will not dilute the brand. Most people won't even notice an increase of them on the road and will still go on buying Ferrari swag.

 

absolutely. 7000 cars worldwide are nothing!! and 10.000 are also nothing. 3000 more cars worldwide per year of ferrari are nothing. but it will tremendous effect on operating income. so yeah why they dont should sell this 3000 more cars? i think they should do it and still the brand ferrari is amazing. how much People can afford a ferrari? ferrari still is the dream of almost every Young men.

[compounding]

A Devils advocate post: I largely agree with the questions and statements made in the Ferrari article. Montezemolo did a fantastic job running Ferrari, I don't think that performance should be taken for granted. As another article pointed out; when he took over the reigns of Ferrari they were bleeding cash.

 

I agree it seems as though adding another 3k cars wouldn't hurt the brand. What I would object to is saying with certainty that it wouldn't dilute the brand when an incredibly successful guy like Montezemolo was adamant about not doing it. I also realise that this appeal to authority isn't a very convincing argument, but the point is to think about the reasons for the differing opinions of Marchionne and Montezemolo. No small issue if he was ready to fight for it enough to sacrifice a job for a company he clearly loved. Remember also that Ferrari was doing very well with his strategy to limit sales.

 

I understand and agree with the notion that more people are getting rich, in new geographic locations, and that they don't want to wait in line to show off their newfound wealth, but I guess my conviction isn't as high as about this as you other guys.

 

Btw, has anyone found a way to read old financials/annual reports of Ferrari?

[phil_Buffett]

i agree that luca did a lot of good things for ferrari. but also a Little bad things the last time.  the ferrari Team in formula 1 is driving the last years like complete idiots. you see the red ferrari and you think about the great days with schumacher for example and all the great memories you Combine with ferrari (pride, or the will to own someday a ferrari....) and then they are driving like total monkeys. the car drives like a hyundai in comparison the Mercedes amg or red bull Renault. so this i think is more brand damage than sell more 3000 cars. Sergio is absolutely right. 3000 cars are ok. i would be worried when he would to sell 50.000 cars of it. 10.000 anually are absolutely in line.

[LC]

I just want to mention for our US friends:

 

The F1 thing is a real draw. Most Americans don't get this. People in other countries watch it passionately. I dated a girl from England who woke up at 4 am religiously to watch these matches. They are most certainly a draw and provide brand value, as some of our European friends on this thread have alluded to.

[rmitz]

A Devils advocate post: I largely agree with the questions and statements made in the Ferrari article. Montezemolo did a fantastic job running Ferrari, I don't think that performance should be taken for granted. As another article pointed out; when he took over the reigns of Ferrari they were bleeding cash.

 

I agree it seems as though adding another 3k cars wouldn't hurt the brand. What I would object to is saying with certainty that it wouldn't dilute the brand when an incredibly successful guy like Montezemolo was adamant about not doing it. I also realise that this appeal to authority isn't a very convincing argument, but the point is to think about the reasons for the differing opinions of Marchionne and Montezemolo. No small issue if he was ready to fight for it enough to sacrifice a job for a company he clearly loved. Remember also that Ferrari was doing very well with his strategy to limit sales.

 

I understand and agree with the notion that more people are getting rich, in new geographic locations, and that they don't want to wait in line to show off their newfound wealth, but I guess my conviction isn't as high as about this as you other guys.

 

Btw, has anyone found a way to read old financials/annual reports of Ferrari?

 

I think the issue is that it’s possible to optimize the number more.  What you want to maintain, is that even at that upper sphere, not everyone that wants a Ferrari can just go in with enough money and buy one.  As long as you do that, I think you’ll be free to increase sales for a while.  You just have to maintain that hunger and buzz.

[merkhet]

My sense is that Luca was looking at this more like a collector than like a businessman.

[peter1234]

My sense is that Luca was looking at this more like a collector than like a businessman.

 

Agreed.

 

I do not think he looked at Ferrari being part of a larger Fiat group.

 

Also, he did not seem to like 'becoming American' and merging with Chrysler.

 

;)

[merkhet]

And just to be completely clear, I think that Luca has been great for Ferrari. He's been an incredible steward of the brand up until recently.

 

I just think that, in this instance, he was more concerned about restricting the supply of his veblin good rather than optimizing the cash flow from the brand.

[gokou3]

http://www.dailymail.co.uk/news/article-2662565/Asia-overtake-North-America-wealth-stakes-Asia-Pacific-housing-4-32m-millionaires.html

 

The number of millionaires rose by 50% over the past 5 years, with most growth coming from the non-US.  So no, having another 3000 Ferrari wouldn't hurt the brand.  The cars are collector items (they are less likely to go to a scrap yard after 10 years) so the growth in the total number of Ferrari lying around is definitely slower than the growth in the number of wealthy people.

[fareastwarriors]

What Will Ferrari Be After Luca Cordero di Montezemolo Leaves?

 

Luca Cordero di Montezemolo was forced to resign as chairman of Ferrari last week. What does this mean for the future of the Italian icon?

 

 

 

 

http://online.wsj.com/articles/what-will-ferrari-be-after-luca-cordero-di-montezemolo-leaves-1411158289?mod=WSJ_hp_EditorsPicks

[Palantir]

This is sad. Maserati is the one that has a lot of potential to become a much bigger brand and exceed M, B, A and Porsche. 3000 Ferraris is a lot and it will cheapen the brand.

[ZenaidaMacroura]

This is sad. Maserati is the one that has a lot of potential to become a much bigger brand and exceed M, B, A and Porsche. 3000 Ferraris is a lot and it will cheapen the brand.

speaking Empirically I don't think so.  In Houston I catch a fleeting glimpse of an f-car every couple weeks driving around -In LA I see one every half hour.  I don't think another 3000 cars will impact the cachet commanded by the brand as seeing them more often in places where wealth is worn on one's sleeve doesn't detract from the visceral delight of seeing (or rather hearing) a 458 spider racing by.

[Palantir]

In your and my circles, maybe no, but in millionaire and billionaire circles, I think it will be magnified.

[LC]

Palantir, there are 12 million millionaires worldwide and the number is increasing.

[MYDemaray]

Palantir, there are 12 million millionaires worldwide and the number is increasing.

 

Yeah, these could all go to emerging markets

[Palantir]

Palantir, there are 12 million millionaires worldwide and the number is increasing.

 

Yes, but those millionaires can be buying Maserati, which IMO should be the core brand. Millionaire is not really that rich, and especially Ferrari wants the customers who are not only going to buy a California, but maybe buy an FF later, and then a Maranello etc. They could also simply raise prices if they want to increase profits.

[gokou3]

Even within the Ferrari brand, they can segment it by releasing special edition (like the La Ferrari).  Then, the simple rich can buy the base model Ferrari while the super rich can buy these limited edition ones.  They can even restrict the purchase of limited edition models to those who has already owned 3 Ferrari or something.  I'm sure those who have more money than know what to do with it will go crazy after them.

 

 

[LC]

As long as they're buying something Fiat makes, I'm a happy shareholder. I think the picture it being painted as very black-white. Luca wanted to keep Ferrari's as an enthusiast car, Sergio wants to pump out the brand like McMansions. The reality is probably somewhere in the middle.

 

Marchionne has done a steller job. His boss is a long-term owner. I don't see them making short-sighted decisions.