racemize Posted July 27, 2016 Share Posted July 27, 2016 Perhaps this is the explanation: https://www.thestreet.com/story/13654448/1/fiat-chrysler-fcau-stock-falls-amid-uncertainty-despite-strong-guidance.html?puc=yahoo&cm_ven=YAHOO&yptr=yahoo Link to comment Share on other sites More sharing options...
goldfinger Posted July 27, 2016 Share Posted July 27, 2016 Credit ratings were restated recently by Moody's. If it continues like that, buybacks will come at some point... :o Link to comment Share on other sites More sharing options...
sampr01 Posted July 27, 2016 Share Posted July 27, 2016 How reliable is that guy tweets about Grand Jury etc. >:( Probably still the restatement issues. Link to comment Share on other sites More sharing options...
merkhet Posted July 27, 2016 Share Posted July 27, 2016 How reliable is that guy tweets about Grand Jury etc. >:( Probably still the restatement issues. Unclear. Seems like a reporter for Bloomberg View? But there's also this http://www.autonews.com/article/20160726/RETAIL07/160729881/federal-grand-jury-probes-fcas-u-s-sales Link to comment Share on other sites More sharing options...
sampr01 Posted July 27, 2016 Share Posted July 27, 2016 Thanks. Are any comments from Sergio in the analyst call. I listened to the call, but looks like no comments or questions?. if no comments from Sergio means bodes well for investors based on previous comments. How reliable is that guy tweets about Grand Jury etc. >:( Probably still the restatement issues. Unclear. Seems like a reporter for Bloomberg View? But there's also this http://www.autonews.com/article/20160726/RETAIL07/160729881/federal-grand-jury-probes-fcas-u-s-sales Link to comment Share on other sites More sharing options...
merkhet Posted July 27, 2016 Share Posted July 27, 2016 Why do you think the lack of commenting from Sergio is a positive thing? I found it odd that they addressed the emissions issue but didn't even bother to mention the current probe from the SEC/DOJ. Link to comment Share on other sites More sharing options...
goldfinger Posted July 28, 2016 Share Posted July 28, 2016 Why do you think the lack of commenting from Sergio is a positive thing? I found it odd that they addressed the emissions issue but didn't even bother to mention the current probe from the SEC/DOJ. Someone asked about emissions during the call. How come no one asked about the investigations though - they probably would have answered. The change in sales reporting method breaks the 75 months streak but shows more sales than reported with the previous method during the corresponding period. Also these are dealer sales numbers... they are not obliged to report them. Link to comment Share on other sites More sharing options...
merkhet Posted July 28, 2016 Share Posted July 28, 2016 Why do you think the lack of commenting from Sergio is a positive thing? I found it odd that they addressed the emissions issue but didn't even bother to mention the current probe from the SEC/DOJ. Someone asked about emissions during the call. How come no one asked about the investigations though - they probably would have answered. The change in sales reporting method breaks the 75 months streak but shows more sales than reported with the previous method during the corresponding period. Also these are dealer sales numbers... they are not obliged to report them. Yes, I meant "they" sort of globally. Meaning analysts & management. Surprised no one asked about the probe & management didn't bother to bring it up. Link to comment Share on other sites More sharing options...
compounding Posted July 28, 2016 Share Posted July 28, 2016 Seriously. Any explanation for todays price action? What merkhet said + kind of weak on revenue and a half a billion in "unrecurring" costs. Also, the markets in the US overall were a bit so-so. The other automakers are reporting better results than FCA are, that's probably why they are up more. I don't think it was a bad quarter, but I think you have to take into account expectations and what the competitors are able to achieve in the same kind of environment... and the facts are that FCA is underperforming their competitors on margins in comparable regions/segments (which Marchionne rightfully got questions about on the call), they reported sort of weak revenue numbers and their balance sheet, while improving, is the worst in the industry. With the surrounding stuff taken into account, the reaction to the report isn't that unreasonable. Also, I would be very very surprised to see some sort of equity buyback announced from FCA in the next say, 18 months. Maybe bonds, but I don't really see a big reason for doing that since they all (that I have seen) trade over par and they don't have any more weird legacy bonds with terrible terms like the ones they called at Chrysler. But I'm pretty sure you were talking about buying back the equity, which is so unlikely given the current capital structure. The way they should work to change the capital structure is to pay down debt, and maybe they will also be required to make contributions to the pension funds if rates keep going down (maybe they will have to even if rates don't go down). I would honestly not even think a buyback would be good news if they announced it, I don't think. But if you want to assume they are in a position to distribute money to shareholders (instead of the capital structure point of view), dividends are probably more likely if you can look to Ferrari as a predictor of the governance at FCA. They have also paid dividends at Fiat in the past, though no buybacks that I'm aware of (except that forced one). Link to comment Share on other sites More sharing options...
bonkers Posted July 28, 2016 Share Posted July 28, 2016 I think the sales data reporting "scandal" is a minor incident. To me it seems that the reporting is made by the dealers (not FCA), unless FCA has manipulated the data or encouraged a bad practice. FCA underlines that the practice started years ago before Fiat (and Marchionne) bought Chrysler. It's somebody else's doings, and probably even bona fides. The variations on individual months can be moderate, say +/- 6 % to new methodology, but even on annual basis this variation declines to < 0.7 %. It's peanuts, within any reasonable measurement error. The key thing is - as FCA states - that it does not affect their reported revenue. FCA has been somewhat promotional with the "streak", that is now broken, but I don't think it's a big deal. The point is not y-o-y monthly growth, but continuing growth. I find any suggestion that this would lead to huge fines or the resignation of the CEO ludicrous. Including and outside this incident, I find FCA's reporting timely, to-the-point, well-written, and generally comprehensive. To me that tells about a well-managed organization, and increases my trust in what they're doing. Of course FCA could always turn out to be a new Enron, but at least I don't see it coming. Link to comment Share on other sites More sharing options...
Ballinvarosig Investors Posted July 28, 2016 Share Posted July 28, 2016 I have no pony in this race, but here's some bearish thoughts, feel free to tear apart. On a like for like quarter comparison basis, when you look at actual cash flows, these numbers don't seem so impressive The decline in revenue, particularly abroad looks concerning The situation in Italy where a decent portion of European earnings come from looks bad and I'd expect a decline in the short-term The concentration of earnings in a highly cyclical US truck market is alarming A technology deficit with regards to EV vehicles where competitors are ahead Also, I think the EBIT numbers are kinda bullsh1t as very little of this seems to actually generate free cash flow. In my opinion, a company like Fiat Chrysler, which is weaker than competitors, has poorer brand recognition will always deserve to trade at a discount. In terms of EV/EBITDA while the discount looks significant, in terms of free cash flow, the valuations between it and competitors looks a better metric and on that sort of basis, the valuation could be justified. Link to comment Share on other sites More sharing options...
bonkers Posted July 28, 2016 Share Posted July 28, 2016 About the quarter, even my own reactions were a bit mixed: The quarterly revenue growth at constant currencies was surprisingly weak +1%, considering their reported unit sales growth (in US +4.3% in old and +1.6 % in new system), and much more in Europe. The decline in LatAm is drastic, but of course the good news is that losses have been cut away, amazingly. FCA collapsed in Australia, but if this is due to pricing it's ok. China seems to be taking a bit longer time, but there is growth. On the other hand, the overall margin was a bit better and cash flow (debt reduction) clearly better than I had anticipated. I expect Q3 to be very similar, whereas Q4 could be very positive. It might be that further U.S. improvement will only come when the readjusted production of Jeep and Ram gets rolling in 2017. Link to comment Share on other sites More sharing options...
compounding Posted July 28, 2016 Share Posted July 28, 2016 I have no pony in this race, but here's some bearish thoughts, feel free to tear apart. On a like for like quarter comparison basis, when you look at actual cash flows, these numbers don't seem so impressive The decline in revenue, particularly abroad looks concerning The situation in Italy where a decent portion of European earnings come from looks bad and I'd expect a decline in the short-term The concentration of earnings in a highly cyclical US truck market is alarming A technology deficit with regards to EV vehicles where competitors are ahead Also, I think the EBIT numbers are kinda bullsh1t as very little of this seems to actually generate free cash flow. In my opinion, a company like Fiat Chrysler, which is weaker than competitors, has poorer brand recognition will always deserve to trade at a discount. In terms of EV/EBITDA while the discount looks significant, in terms of free cash flow, the valuations between it and competitors looks a better metric and on that sort of basis, the valuation could be justified. Think the cash flow numbers were fine. Keep in mind that the cash flows bounce around a bit from quarter to quarter in this business. Some of the revenue decline from abroad is due to the fact that they have switched from a import based to a localized production based system in China. Accounting wise that means that they record those sales through equity income instead of the usual way of accounting it (which means it had some impact in the yoy comparison this quarter). Looking at Q2 the revenue looks quite bad from APAC and earnings look comparatively good - for the above reason. LATAM was bad but that wasn't much of a surpise. EMEA was up but maybe not as much as expected from watching the registration numbers. No improvement yet from Maserati on revenue, but according to management they have now worked through an inventory issue in the US and things should start tp improve from here. Should also see an impact from the newly launched Levante soon. Italy seems fine to me. Their auto market has been pretty much soaring and business/consumer confidence is strong. Quite surprising when you only read headlines from the banking issues. Hard to argue with the concentration in trucks, although if you own this stock, presumably you agree with management that it is a good idea to focus on areas where they can achieve good ROIC. Cars in the US is not one of those areas. They actually have EV, hybrids. EV sales are like 1% of the market, I'm skeptical there is much advantage with being a first mover assuming a secular shift. There's not much in auto that has equaled a sustainable technology advantage in the past, and I don't think electric vehicles will be that disruptive moment. Much of the development in this area will take place in the supplier base as I see it. Maybe if you have some evidence contrary to my thoughts you can post it. Agree adjusted EBIT is not a good proxy for FCF. Disagree with your thoughts on brand recognition - think almost all of their brands have good recognition in certain segments/geographies. And Jeep, Maserati and maybe Alfa Romeo I would argue have global appeal. The FCF from this company could be higher, but they are investing a lot into the business now because they think that they have good brands that will earn a good ROIC if they invest now. Again, if you disagree you probably don't own the stock. Thanks for taking the time to post your bearish thoughts, it is quite useful to the longs. Bonkers: they had working capital headwinds in Q1 that reversed and became a tailwind in Q2. Link to comment Share on other sites More sharing options...
goldfinger Posted July 28, 2016 Share Posted July 28, 2016 Also, I would be very very surprised to see some sort of equity buyback announced from FCA in the next say, 18 months. Maybe bonds, but I don't really see a big reason for doing that since they all (that I have seen) trade over par and they don't have any more weird legacy bonds with terrible terms like the ones they called at Chrysler. But I'm pretty sure you were talking about buying back the equity, which is so unlikely given the current capital structure. The way they should work to change the capital structure is to pay down debt, and maybe they will also be required to make contributions to the pension funds if rates keep going down (maybe they will have to even if rates don't go down). I would honestly not even think a buyback would be good news if they announced it, I don't think. But if you want to assume they are in a position to distribute money to shareholders (instead of the capital structure point of view), dividends are probably more likely if you can look to Ferrari as an predictor of the governance at FCA. They have also paid dividends at Fiat in the past, though no buybacks that I'm aware of (except that forced one). I agree with you until the transition is over and the balance sheet appropriate. Then (probably end 2017 to 2018 depending on how fast they go) if the stock price has not improved I would think that a buyback would be a very efficient way to payback shareholders... Link to comment Share on other sites More sharing options...
Ballinvarosig Investors Posted August 2, 2016 Share Posted August 2, 2016 http://www.theverge.com/2016/6/20/11978044/anton-yelchin-jeep-recall-confusing-design-gear-lever Those gear levers are pretty tricky. I think you have to hold the button and press up to go into park, otherwise it just shifts into neutral. Then also engage the parking brake. But he was on a steep incline, so how could he be in neutral and not notice the car rolling as he got out? More than likely he just didn't engage the parking brake but used the gear lever just fine. Lawsuit going in now - http://www.nydailynews.com/autos/news/anton-yelchin-parents-file-wrongful-death-lawsuit-article-1.2734470 Link to comment Share on other sites More sharing options...
fareastwarriors Posted August 3, 2016 Share Posted August 3, 2016 Samsung is particularly interested in Magneti Marelli’s lighting, in-car entertainment and telematics business and could consider an acquisition of the whole company, the people said, asking not to be identified as the discussions are private. The deal could be worth more than $3 billion with a goal of closing this year, said one of the people. That would make it Samsung’s biggest-ever acquisition outside South Korea. Fiat’s shares rose the most since October 2014. Samsung Said in Talks to Buy Assets of Fiat Auto-Parts Unit http://www.bloomberg.com/news/articles/2016-08-03/samsung-said-in-talks-to-buy-assets-of-fiat-auto-parts-unit-ireppnz7 Link to comment Share on other sites More sharing options...
fareastwarriors Posted August 28, 2016 Share Posted August 28, 2016 Fiat Chrysler CEO Sees Samsung as Potential Strategic Partner http://www.bloomberg.com/news/articles/2016-08-27/fiat-chrysler-ceo-sees-samsung-as-potential-strategic-partner-isdm54q4 Link to comment Share on other sites More sharing options...
LC Posted August 28, 2016 Author Share Posted August 28, 2016 Guess it didn't work out with apple Link to comment Share on other sites More sharing options...
goldfinger Posted September 3, 2016 Share Posted September 3, 2016 Find the anomaly: http://screencast.com/t/m4xsuvcG Oh, and sales are up 24.1% in Italy for August too: "In August, FCA outperformed the industry average in Italy once again, with sales up 24.1% (vs. 20.1% for the industry) to more than 20,000 vehicles. Market share increased 90 basis points to 28.9%. For the eight months year-to-date, FCA sales were up 20.2% year-over-year, compared with 17.4% for the industry. By brand, sales were up 56.7% for Jeep, 26.1% for Fiat and 26.1% for Alfa Romeo. FCA continued to dominate the Italian rankings with eight models in the top ten. These included the Fiat Panda, Lancia Ypsilon and Fiat Tipo (ranked in order as the top three), in addition to the Fiat 500L, Fiat Punto, Fiat 500X, Fiat 500 and the Jeep Renegade. The Fiat Tipo was also leader in the C segment for the second consecutive month." Link to comment Share on other sites More sharing options...
merkhet Posted September 3, 2016 Share Posted September 3, 2016 http://www.carmagazine.co.uk/car-news/industry-news/alfa-romeo/what-fiat-chrysler-chief-sergio-marchionne-told-us-over-lunch/ FCA thus has less than three years to secure €9bn in operating profit per annum and to accumulate over €5bn in cash. This would be a remarkable achievement for what once was a moribund enterprise which lost five million dollars a day back in 2004. The question is: can Marchionne and his allies and his successor do this alone? Is the chairman’s pet subject, consolidation with another big player, a precondition for survival, accepting plant closures and job cuts as unavoidable collateral damage? If so, where are the suitable brides? Mary Barra said no, the Chinese partner needs more time to grow, Toyota is overwhelmingly powerful, Mazda is too small. So would the suitable candidate, who should be strong in Asia but can be weak in North America, please step forward. Ten months ago, this candidate was Martin Winterkorn’s VW. Although the Volkswagen board of directors – above all the labour leader Bernd Osterloh – was not yet fully convinced, a deal was in the process of being put together. But then dieselgate rocked Wolfsburg, and it became very clear that the management style imposed by Piëch and Winterkorn no longer worked, and probably never did. Marchionne would neither confirm nor comment on it, but a merger with FCA could bring to VW instant credibility in North America by fixing almost all its issues with the support of a company that understands the US market. Further upside potential includes Fiat’s cost-efficient (‘the marque is now profitable in 28 European markets’) small car infrastructure in Europe (‘we know how to do cheap’), the appeal of the flourishing Jeep brand in a world that has gone SUV-crazy, and the attraction of Alfa Romeo and Maserati which would be a splendid fit to the Germans’ premium product portfolio. The man in the black pullover is listening to all this, poker-faced and unusually tight-lipped. When it comes to VW, it seems I simply can’t coax him onto the record. Link to comment Share on other sites More sharing options...
Phaceliacapital Posted September 5, 2016 Share Posted September 5, 2016 Thanks! Link to comment Share on other sites More sharing options...
fareastwarriors Posted September 7, 2016 Share Posted September 7, 2016 The Minivan Is Back, and It’s Kind of Cool A long-stagnant auto category is big again thanks to a crush of toddlers and a swanky new Chrysler. http://www.bloomberg.com/news/articles/2016-09-06/the-minivan-is-back-and-it-s-kind-of-cool Link to comment Share on other sites More sharing options...
fareastwarriors Posted September 15, 2016 Share Posted September 15, 2016 interesting.... If Apple or Uber Really Build A Car, Here’s Where They Might Start https://www.bloomberg.com/features/2016-magna-international/ Link to comment Share on other sites More sharing options...
aalexa1225 Posted September 18, 2016 Share Posted September 18, 2016 Really cool article. Makes me think the incumbent car manufacturers pretty much have their futures assured that they will continue to be players in the market. And the reason for this is that they have the know-how, it is not all about the capital assets. And it is know-how across a huge network of suppliers, so it is not like the know-how is concentrated in just a few engineers who can be poached. I guess I got the sense that building cars is hard and you have to have a certain scale to do it. Makes me more likely to buy some Ford, GM, FCAU and the like. Do you guys think there is a big difference between the car manufacturers? Maybe Sergio M stands out for his management skills? AOA Link to comment Share on other sites More sharing options...
Spekulatius Posted September 18, 2016 Share Posted September 18, 2016 interesting.... If Apple or Uber Really Build A Car, Here’s Where They Might Start https://www.bloomberg.com/features/2016-magna-international/ Contract manufacturing is a really crummy business. Why would nobody get into that business is beyond me. Link to comment Share on other sites More sharing options...
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