Jump to content

FCAU - Fiat Chrysler Automobiles

LC

By LC
in Investment Ideas

 Share

Recommended Posts

merkhet Newbie

merkhet

Posted
Posted

http://www.fcagroup.com/en-US/media_center/fca_press_release/FiatDocuments/2016/february/JANUARY_2016_FCA_US_LLC_SALES_IN_USA.pdf

 

FCA US LLC Reports January 2016 U.S. Sales Increased 7 Percent; Best January Sales Since 2007

  • 70th-consecutive month of year-over-year sales gains
  • Jeep® brand sales up 15 percent; best January sales ever
  • Jeep Cherokee, Jeep Patriot, and Jeep Compass record their best January sales ever
  • Dodge brand sales up 19 percent; Dodge Challenger, Dodge Charger and Dodge Journey register their best January sales ever
  • Ram pickup truck posts best January sales ev

 

Chrysler & Fiat brands down 20% y-o-y. From the numbers, I suppose it makes sense why they're shifting emphasis away from the Chrysler 200 and the Dodge Dart.

Link to comment
Share on other sites
  • Replies 3k
  • Created
  • Last Reply

Top Posters In This Topic

Popular Days

Top Posters In This Topic

Popular Days

Posted Images

merkhet Newbie

merkhet

Posted
Posted

Apologies in advance for the lengthy post. TL;DR: Seems like Sergio's shift to gas guzzlers is correct according to Mike Jackson @ AutoNation.

 

It could be that everyone is prepping for a record selling season, but given Autonation's sizable miss and comments regarding new & used car margins & pricing, I think it's more like OEMs stuffing channels and building sizable over-capacity. The operating leverage of these auto OEMs is freaking massive, and when the cycle turns cash is going to bleed like a chicken getting its head chopped off.

 

I've just gotten around to reading the AutoNation conference call (http://www.thestreet.com/story/13439905/1/autonation-an-earnings-report-q4-2015-conference-call-transcript.html)

 

It looks like the reasons for the miss are:

  • Despite increases in both their revenues & gross margins, their SG&A as a % of GM went up
  • They state that they were overweight Texas which caused some issues
  • They mention that the industry overproduced @ 17 million from 2000 to 2006, but I think that 17 million post-recession might be a different situation (and AN seems to agree)
  • The pressure seems to be on the luxury units, which is consistent w/ Alfa & Maserati results but doesn't seem to be on the Dodge, Ram, Jeep segment

Not to turn this into an AutoNation thread, but these are the relevant parts of the transcript that I thought were worth highlighting as it concerns Marchionne/Fiat and their shift into SUVs, trucks, Jeeps, etc. (And there are a few quotes about how Texas has impacted AutoNation.)

 

Mike Jackson (Chairman, President, and CEO):

 

We were over weighted in Texas and in premium luxury compared to the industry, and that would be the explanation for any gap in our performance.

 

John Murphy (Analyst - BofA Merrill Lynch):

 

Good morning, guys. Just a first question that kind of follow up on the inventory. If you look at the aggregate in the industry and the D3 and even the J3, it was a small, very tiny increase on an absolute basis year over year in the fourth quarter. Premium luxury seems to be where the focus is.

 

So I'm just curious -- I know you can't necessarily get into specific companies, but as we look at this, do you see the [illactions] of 2000 and 2006 that some in the D3 were committing really reemerging here? Or is what we are seeing at the end of last year and the beginning of this year more a function of what's going on purely in the premium luxury, and your comments are try to make sure that it doesn't reemerge at the D3?

 

Mike Jackson (Chairman, President, and CEO):

 

Yes, I think it's more in the second. I think domestics are very well positioned to exceed in 2016. Almost all the excess inventory is in cars, not in trucks. So the extent that you have strengthened trucks and can produce more trucks, you want to thrive in 2016.

 

I think Sergio's decision to switch over factories from car production to truck production shows you the sense that the consumer has that they are totally committed to cheap gas and to trucks. It's really become a strategic question, not a tactical question.

 

So wherever you stand on trucks is your position of strength in the marketplace. That's very different than 2000 in the domestics in that from a starting point, the domestics are in a very good position.

 

Mike Jackson (Chairman, President, and CEO):

 

It's very interesting. I expressed my plateau point of view on CNBC the first week of January and then got on a plane and went to the Detroit Motor Show. I would say the overall discussion agreed that the six years of rapid growth are over, that the industry is plateauing at a very high, very acceptable level. And no one is really saying this thing is going to blow by 18 million through 18.5 million or something within the industry. I know there's some others out there that have a point of view that that's going to happen.

 

If that were to happen, I can tell you this. It would take significant price action that would be pulling forward future business from my point of view. Now, unfortunately, every executive is very confident and optimistic about their position in the marketplace. And they have plans for growth in 2016.

 

So if you add up everyone's individual plan, you have this classic situation, that everyone is going to take share, but that means they've set the plants to run to go out and achieve that. So while they're being conservative and disciplined in saying the total market is probably mid-2017 plus or minus 100,000 units, we will take that right away, we're going to take a bigger piece of the pie.

 

So I think that's then going to be incumbent upon retailers to really push back where appropriate and say that's more than this marketplace is going to take, particularly on the car side. To the extent you can increase production on trucks, that's fine, but it's got to be substitution for cars. It's not incremental business.

 

I think that's a solid plan. I think if retailers push back on very aggressive production plans -- and by the way, we are being given very aggressive stair-step targets also, which again indicate that individually they are planning for significant growth.

 

So the ball is kicked, debate is underway, and hopefully the industry can manage it successfully. Because it's going -- the challenge for the industry I see over the next several years is we can have multiple years above 17 with the pent-up demand that's out there. But in a plateau new vehicle market, can we grow earnings and the quality of earnings, or are we going to have a share fight that results in ruinous incentives for the manufacturers and for retailers. I think that's sort of a line we are trying to walk down at the moment.

 

Mike Jackson (Chairman, President, and CEO):

 

I think first on the consumers' commitment to pay for their car loans, whether it's leased or financed, it's unwavering. I see absolutely no sign of difficulties in auto finance. I think it's all being run very prudently in disciplined way. So no alarm bells there.

 

Mike Jackson (Chairman, President, and CEO):

 

No, I think the biggest threat to used car values are additional incentives from the manufacturers or additional discounts from us. That's the big picture issue. So it's very interesting our fourth-quarter performance, where by manufacturers increasing incentives by $250 a car, us increasing our discount by $220 a car, that had an immediate impact on our used car values. And then we had to discount anything that was relatively new versus the new vehicle on the showroom floor. It's a double impact; it impacted our new vehicle gross margin. It impacted our used vehicle gross margin.

 

So that is the biggest issue, and that's my greatest concern about overproduction. And you could say, Mike, what do you care if the manufacturers increase their incentive significantly. You'll just sell more new cars. It pulls the rug out from underneath the value of my used car inventory.

 

And also to your point, it really disappoints your existing owner base, your most loyal customers, because you have depreciated ultimately the value of their trade in. So it's really a lose-lose. It's a lose in the short term and it's a lose in the long term.

 

And I really would not want to see incentives go beyond on the manufacturer level. They are about 10% of suggested retail price at the moment. So we are approaching double digits, and I really hope we don't go beyond that.

 

Irina Hodakovsky (Analyst - KeyBanc Capital Markets):

 

This is Irina again on for Brett Hoselton. A follow-up question to our earlier discussion. You mentioned you are overweight in Texas and Texas under was beginning -- you saw some decline. Can you tell us how much Texas declined, and what is your exposure there?

 

Mike Jackson (Chairman, President, and CEO):

 

I think Texas is about 24%, 25% of our business for 2016. So that's a significant overweight. As you know, our three big states are California, Texas, and Florida. Florida is absolutely booming; Texas is under stress. We had a decline in Texas: same-store sales units of 2%. But I will also tell you, it took a lot more discount to get that done in Texas, so it had a significant impact on the bottom line.

 

Mike Jackson (Chairman, President, and CEO):

 

That was our last question. Somebody said it earlier in a statement calling out our ability to adapt to circumstances, how we've demonstrated that in the past. We will do that again; can't tell you exactly how long it will take, but it's underway.

 

We still totally believe in the validity of our diversified model. We are one-third domestic, one-third Asian, and one-third premium luxury. Obviously the domestic business with trucks is as strong as you can imagine, and Asian is challenged because fuel economy, which is their strength, is not valued by the marketplace at the moment. And we have a surprising challenge with premium luxury here in the fourth quarter.

 

We are diversified by business type, we went through all that, and we are diversified geographically. Yes, we have a storm in Texas at the moment that will take some time to blow through. But in total, it's an adaptable model and we will do that once again.

 

So thank you for your patience today, thank you for your very constructive questions, and we will look forward to talking to you again in the future. Thank you very much for joining us today.

 

So my read from this is that Sergio is making the correct move by de-emphasizing passenger cars while emphasizing SUVs, trucks and Jeep. It reads to me like the demand for SUVs/trucks/Jeeps is there, and the people who lose are going to be the people who want to fight for share in the passenger car market, sort of like when Sergio refused to fight for share in Italy when Italy sales were cratering.

 

Moreover, the main issue in terms of inventory that we'll have to watch out for is whether dealer incentives start getting pushed to move cars off the lot, but, again, this seems to be more towards the passenger car market than the SUV/truck/Jeep market.

Link to comment
Share on other sites
merkhet Newbie

merkhet

Posted
Posted

 

 

Fiat Chrysler Rollaway Reports Draw Stepped-Up Regulatory Probe

 

http://www.bloomberg.com/news/articles/2016-02-07/fiat-chrysler-rollaway-reports-draw-stepped-up-regulatory-probe

 

 

 

:-[

 

Seems to have caused the big drop today. Has anyone looked into this in more detail?

 

I looked through a bunch of articles today. Essentially, it seems like there's no malfunction in the shifter. It's merely that people don't know how to use the shifter correctly -- and they end up pushing the "start/stop" button when they are not in park. Since the car won't turn off (don't want accidental button push while on the highway) when you're not in park, the car keeps going. It's 100% user error!

 

I was joking with a friend earlier that maybe the fix would be to stop selling to morons.

Link to comment
Share on other sites
jay21 Newbie

jay21

Posted
Posted

 

 

Fiat Chrysler Rollaway Reports Draw Stepped-Up Regulatory Probe

 

http://www.bloomberg.com/news/articles/2016-02-07/fiat-chrysler-rollaway-reports-draw-stepped-up-regulatory-probe

 

 

 

:-[

 

Seems to have caused the big drop today. Has anyone looked into this in more detail?

 

I looked through a bunch of articles today. Essentially, it seems like there's no malfunction in the shifter. It's merely that people don't know how to use the shifter correctly -- and they end up pushing the "start/stop" button when they are not in park. Since the car won't turn off (don't want accidental button push while on the highway) when you're not in park, the car keeps going. It's 100% user error!

 

I was joking with a friend earlier that maybe the fix would be to stop selling to morons.

 

Then there might not be any customers left ;)

Link to comment
Share on other sites
merkhet Newbie

merkhet

Posted
Posted

The issue is no tactile feedback when placed in park...maybe they can fix in software and give a light or sound to improve feedback. Can't just blame the user.

 

There's a letter in the dashboard that tells you what gear the car is in. It's exactly like my Prius.

Link to comment
Share on other sites
Picasso Newbie

Picasso

Posted
Posted

It does seem a bit overdone to fall 10% on that kind of news. 

 

As an aside, the Ferrari spin has created a negative effect on Fiat debt.  It seems like the end game is to push for a sale but 5Y CDS spreads have gone from 137 bps to 523 bps (up 34 bps today alone).  This compares to 171 bps on 5Y GM CDS so safe to say the market doesn't believe Fiat's 2018 numbers at all. 

Link to comment
Share on other sites
whatdadil9 Newbie

whatdadil9

Posted
Posted

of course the market doesnt believe 2018 numbers. Today market cap is less than 9bn US. The Company had 5BN EUR of net debt end of '15 and is scheduled ot have roughly 5bn EUR of CASH YE 2018. By my estimate that is 10bn EU of free cash generation which at todays exchange rate is about 11.2bn USD. So over the next 2.5 years the company will generate 125pct of todays market cap in cash. How does that at all make sense?

 

Said a diferent way. I think the Company could do 5.00 + of EPS when you run their EBIT numbers on the right interest expense in 2018...Rendering the company trading at 1x EPS. Regardless of your views on mobility...Car companies are going to be around much longer than 2018.

 

Also. PARTS.

 

Marrelli earns about a 5.6 pct margin on 7bn EUR of Sales. I think the goal is to get to 8-10 pct. They have steadily been increasing margins on this front and they hired new leadership last year I believe. At 600-700mm of EBIT EURO , whats that worth? at least 10x to a strategic.... 6-7bn in 12-24 months.  Thats Almost the entire market cap at these levels....

 

I dont see how you lose money at these levels. This is not a retailer. There is no commercial alternative to cars and their wont be for a very long time!!!

Link to comment
Share on other sites
goldfinger Newbie

goldfinger

Posted
Posted

http://business.financialpost.com/news/transportation/fiat-chrysler-adds-1200-jobs-to-windsor-plant-in-preparation-for-new-pacifica-minivan

 

A bit more informative than "FCA bets on cheap oil prices forever" or stupidity like that...

 

"When asked if the company’s big-car-and-truck strategy could backfire if gasoline prices rise again, Bigland said he’s not worried.

 

“I think the fallacy out there is when fuel prices are up, people want small cars, and that’s not the case,” said Bigland, who is also Fiat Chrysler’s head of U.S. sales and head of the Alfa Romeo brand in North America.

 

“What people want is fuel-efficient vehicles … so the real key is to make large vehicles more relevant for a $4-a-gallon gasoline environment.”

 

Bigland pointed to the Pacifica, which gets 2.9 litres per 100 kilometres, saying “it doesn’t get any more fuel-efficient than that.”

Link to comment
Share on other sites
arcube Newbie

arcube

Posted
Posted

http://business.financialpost.com/news/transportation/fiat-chrysler-adds-1200-jobs-to-windsor-plant-in-preparation-for-new-pacifica-minivan

 

A bit more informative than "FCA bets on cheap oil prices forever" or stupidity like that...

 

"When asked if the company’s big-car-and-truck strategy could backfire if gasoline prices rise again, Bigland said he’s not worried.

 

“I think the fallacy out there is when fuel prices are up, people want small cars, and that’s not the case,” said Bigland, who is also Fiat Chrysler’s head of U.S. sales and head of the Alfa Romeo brand in North America.

 

“What people want is fuel-efficient vehicles … so the real key is to make large vehicles more relevant for a $4-a-gallon gasoline environment.”

 

Bigland pointed to the Pacifica, which gets 2.9 litres per 100 kilometres, saying “it doesn’t get any more fuel-efficient than that.”

 

Just making sure I got it right. Almost 63 miles for appx 0.6 Gal?

Link to comment
Share on other sites
marcosc Newbie

marcosc

Posted
Posted

http://business.financialpost.com/news/transportation/fiat-chrysler-adds-1200-jobs-to-windsor-plant-in-preparation-for-new-pacifica-minivan

 

A bit more informative than "FCA bets on cheap oil prices forever" or stupidity like that...

 

"When asked if the company’s big-car-and-truck strategy could backfire if gasoline prices rise again, Bigland said he’s not worried.

 

“I think the fallacy out there is when fuel prices are up, people want small cars, and that’s not the case,” said Bigland, who is also Fiat Chrysler’s head of U.S. sales and head of the Alfa Romeo brand in North America.

 

“What people want is fuel-efficient vehicles … so the real key is to make large vehicles more relevant for a $4-a-gallon gasoline environment.”

 

Bigland pointed to the Pacifica, which gets 2.9 litres per 100 kilometres, saying “it doesn’t get any more fuel-efficient than that.”

 

Just making sure I got it right. Almost 63 miles for appx 0.6 Gal?

 

I think he's referring to the hybrid version

Link to comment
Share on other sites
Guest neiljgsingh

Guest neiljgsingh

Posted
Posted

US January numbers: http://www.fcagroup.com/en-US/media_center/fca_press_release/FiatDocuments/2016/february/JANUARY_2016_FCA_US_LLC_SALES_IN_USA.pdf

 

Europe January numbers: http://www.fcagroup.com/en-US/media_center/fca_press_release/FiatDocuments/2016/february/JANUARY%202016%20FIAT%20CHRYSLER%20AUTOMOBILES%20SALES%20IN%20EUROPE.pdf

 

All coming together really nicely.

Link to comment
Share on other sites
TwoCitiesCapital Newbie

TwoCitiesCapital

Posted
Posted

 

Certainly gets me excited to read his reports. I have to temper my enthusiasm with my overall bearishness, but I've certainly been adding at these levels. Haven't even been watching EXOR. That may be the smarter play - more diversified and a wider discount...

Link to comment
Share on other sites
muscleman Newbie

muscleman

Posted
Posted

 

Chrysler 200 is falling off the cliff, so are the fiat 500 series for the US market.

 

Link to comment
Share on other sites
fareastwarriors Newbie

fareastwarriors

Posted
Posted

 

Yup... luckily there is Jeep and Ram trucks...

Link to comment
Share on other sites
goldfinger Newbie

goldfinger

Posted
Posted

 

Yup... luckily there is Jeep and Ram trucks...

 

Yep Marchionne who is not a car guy was lucky to be able to catch Chrysler in 2009 with a high interest loan from the government when it was losing 1B$ a month and he was lucky to clean it up too!

Link to comment
Share on other sites
merkhet Newbie

merkhet

Posted
Posted

The passenger & luxury car segments are down consistent with the comments from AutoNation's conference call -- also consistent with that call are Fiat's SUV, truck & Jeep numbers.

 

We will see how long the market can continue to ignore Fiat's margin expansion and unit growth.

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share
Go to topic listing


×
×
  • Create New...