Dalal.Holdings Posted January 16, 2017 Share Posted January 16, 2017 German Minister Dobrindt Seeks Recall of Fiat Cars, Bild Reports https://www.bloomberg.com/news/articles/2017-01-15/german-minister-dobrindt-seeks-recall-of-fiat-cars-bild-reports The incredible thing is that, according to German investigators (sources below), Fiat's exhaust treatment control systems consistently switch off after 22 minutes. A standard approval test is 20 minutes and so this would allow the car to pass the test. If that's not a defeat device, then I don't know what is. It's unclear whether this "22 minute" practice extended to FCAU's U.S. vehicles, but the German allegations are the most serious thus far. Fiat's response has been to dismiss German tests and claim that they should be done in Italy (where the obvious favoritism/corruption would exist). Italian authorities have remained mum thus far. Germans, after having their own Volkswagen take massive hits over its scandal, are unlikely to give Fiat a pass...At the very least they will demand that these cars be recalled from the German market. http://europe.autonews.com/article/20161020/ANE/161019836/fiat-chrysler-tech-boss-defends-defeat-device-claims-before-eu-inquiry https://cleantechnica.com/2016/09/21/german-authorities-send-test-results-indicate-fiat-chrysler-used-defeat-devices-diesel-vehicles/ "Following this 22 minute time period, and the disabling of the emissions-control systems, nitrogen oxide (NOx) emissions rose to more than 9–15 times the legal limit, according to the KBA." "Germany’s KBA motor vehicle authority has carried out investigations on several Fiat vehicles, Friedrich said at a regular government press conference. “The result was that a considerable reduction of the exhaust gas cleaning function occurs after a certain time. We are still of the opinion that these are unlawful switch-off facilities.” " Link to comment Share on other sites More sharing options...
Phaceliacapital Posted January 16, 2017 Share Posted January 16, 2017 Remained mum on ? https://www.bloomberg.com/news/articles/2017-01-16/italy-calls-german-fiat-recall-push-unacceptable-as-spat-widens BTW EMEA is (I think) 20% of total group sales so I doubt Germany is a big market should they have to recall. Given that they're fined, the 2018 plan calls for 3 in earnings and 5bn in net cash. Erase that 5 bn as possible fine and you're still trading at 3x 2018 earnings? Link to comment Share on other sites More sharing options...
whiterose Posted January 16, 2017 Share Posted January 16, 2017 Fiat's response has been to dismiss German tests and claim that they should be done in Italy (where the obvious favoritism/corruption would exist). Italian authorities have remained mum thus far. I'm not a lawyer, but to be allowed to distribute cars in the EU, you only need to comply with the laws of one country. In this case it's Italy and the italian authorities know for a long time about the internal software-routines and possible devices.. So from a pure legal standpoint the germans can't really do anything but put pressure on the administration via diplomacy/EU and then only going forward I guess. If they have to pull out of some EU-markets I can imagine this would be the basis for a case to get damages. But this doesn't affect the EPA issues obviously.. Link to comment Share on other sites More sharing options...
mateo999 Posted January 16, 2017 Share Posted January 16, 2017 He's constantly spoken about the emissions laws being unclear and open to interpretation. I actually think he's said that emission laws are quite clear in the US, but that Europe is where they're unclear. From the Q1 call held on 4/26/16: I think it is clear that we understand the U.S. environment relatively well, now having lived through for a number of quarters, through the type of expectations and having achieved, I think, a meeting of the minds with the administrator and then staff and it's about what is expected going forward. And I think we're beginning to tool ourselves and tool the organization to deal with that environment and adequately answer any safety concerns that a regulator of the marketplace might have. On the European side, I had a chance to go through the report that was issued last Friday by the Commission that was presented by the Ministry of Transport in Germany. It is available now in English for anybody who's interested in it. I think it makes for a very interesting reading. I cannot disagree with the Minister, because I think he has pointed out, there is a result of the work that was carried out by the Commission, by the KBA and the Ministry itself. Given the way, in which European rules are set up and the way in which homologation authority is subject to devolution under the European arrangement that it is – there needs to be much better coordination across the national bodies about what it is that has effectively allowed as relevant technology in order to meet an emission standard. Link to comment Share on other sites More sharing options...
Guest ajc Posted January 16, 2017 Share Posted January 16, 2017 He's constantly spoken about the emissions laws being unclear and open to interpretation. I actually think he's said that emission laws are quite clear in the US, but that Europe is where they're unclear. From the Q1 call held on 4/26/16: Good catch, but I'm not sure it materially changes the EPA calculus. The EPA would not have waited 2 years and until the last week of the Obama presidency to rush something out the door if they had a smoking gun. In fact, I think reason dictates you'd probably want to take the opposite view. Why, except in the worst of circumstances, would you leave something like this to the last minute and not make it clear you had caught them in a blatant fraud? I think it's sensible to conclude the EPA has a weak case compared to the VW one, so they just wanted to get something out there regardless of how likely it was to win. Just my opinion. As for Europe, I don't think the EPA and KBA tests are comparable. My understanding is that Germany would need to break EU law to make a recall happen. Any recall based on tests not done by the Italian regulator would basically undermine legal agreements at the core of the EU. FCA needs to pass Italian emissions testing carried out by their regulator if they want to sell throughout the EU. That happened and they found no defeat devices, so that's pretty much all there is to it. The Italian government would have an open-and-shut case against the German government if they attempted a recall based on the KBA testing. My guess is that's why 4 months after those articles were written, the German government hasn't pulled any vehicles off the road. FCA has to comply with EU law, but they can't change their national regulator or lobby for stricter laws. Firstly, that's not how the EU is legally designed, and secondly, tougher regulations aren't in FCA's competitive interest. As far as I can see, FCA played ugly but not illegally in both the US and Europe. There isn't much more to it than that. Again, these are simply my personal views. Link to comment Share on other sites More sharing options...
bonkers Posted January 16, 2017 Share Posted January 16, 2017 My impression of Marchionne is that he has zero tolerance for any illegality, but if there is an area (controversial or not) where he sees a possible advantage then he will get every lawyer he can to look at it every which way and then go ahead if the letter of the law says it's okay. ... He's constantly spoken about the emissions laws being unclear and open to interpretation. ... Judging from the rushed, unclear nature of the accusations it seems like an attempt to go out in a blaze of glory rather than in a reasonable and considered manner. ... That's just my personal opinion and it's not backed up by any formal legal training. ajc, my thinking pretty much follows yours on this issue. My hunch is that FCA might have taken the easy way out not because they could profit from it, but more likely because they had lacklustre technology and couldn't reasonably do any better. I remember Marchionne mentioned that when he got started, Fiat was so much behind the Germans. I also read between the lines that the Italian authorities allowed some exceptions to the rules as a barter for jobs or maybe R&D investments in Italy, and a promise to catch up over a few years. But this is just my imagination, NOT a fact. However, by Marchionne:"We may be technically deficient but not immoral. We never installed any defeat device." If Italy is in position to accept FCA for all of EU - just as France for Renault, I guess - then that's just the way it is. Naturally the system has its flaws such as favoritism of national champions. Germans can whine, but they are in a very soft position to enforce anything. I have no idea what EU commission can do, but also changing the practice retroactively on cars Italy accepted and that in minister's words are "absolutely fine", or contain "no illegal devices or abnormal procedures" when the company showed “maximum transparency" seems very unlikely to me. Furthermore, just imagine the circus if they remove this underlying principle, and cars have to be accepted separarely in all member states. Or, if there needs to be a common institution to do the testing, it first needs to be established and given that role...for the future. You know Marchionne also has legal training, and is known as a tough negotiator, so I believe his instinct with topics like this would be to first cover the company's back. At the latest when the VW scandal broke, even if the cars were already in the market, I'm sure they ran an intensive intra-company review to be absolutely sure where they stood. It does not mean they came out fully clean, but at least they should know the state of evidence and how to defend themselves. Marchionne: "We are confident that no one at FCA committed any fraud or tried not to be compliant." I don't know if his hard language is meant to dispel legal allegations, stand up for his employees, or if he really is infuriated for the unnecessary PR damage (maybe hurting his bonus). Could be any, or all. Coming to America, I also paid attention to the timing of EPA announcement. Perhaps they felt they were on to something they did not want to get lost even if the offce would be downsized and jobs cut, and to force the new administration to do at least something. But certainly the work seems half-finished, at best. To my knowledge FCA was also not caught in the original tests that got VW, so at least it's not that bad. Making this kind of technical legislation is certainly difficult, and never fool-proof. But my sense of justice would say that also corporations are presumed innocent until proven guilty. But who knows what the government, or eventually perhaps the legal machinery arrives at. Disclosure: Also no legal training, just opinions, own FCA stock. Link to comment Share on other sites More sharing options...
Guest ajc Posted January 16, 2017 Share Posted January 16, 2017 Coming to America, I also paid attention to the timing of EPA announcement. Perhaps they felt they were on to something they did not want to get lost even if the offce would be downsized and jobs cut, and to force the new administration to do at least something. But certainly the work seems half-finished, at best. To my knowledge FCA was also not caught in the original tests that got VW, so at least it's not that bad. Making this kind of technical legislation is certainly difficult, and never fool-proof. But my sense of justice would say that also corporations are presumed innocent until proven guilty. But who knows what the government, or eventually perhaps the legal machinery arrives at. Your thoughts on the technology are more sensible than mine. I'm sure that review took place, Marchionne shows no sign of being the type to leave it to chance. I think it's also highly unlikely the EU processes get changed retroactively. The NY Times did a story on EPA nominee Pruitt a day or two ago. Definitely a worthwhile read. Long story short: the environment is screwed, but companies like FCA and others should see enormous benefit. Marchionne just seems old school, but also street and book smart. He made a big deal in the 60 Minutes documentary I think, about saving Chrysler on a handshake and his word. My sense is he's a little pissed his integrity is being questioned when really he's just a killer who plays up to the line but doesn't cross it. The rest of it too though. Link to comment Share on other sites More sharing options...
Phaceliacapital Posted January 17, 2017 Share Posted January 17, 2017 Marchionne just seems old school, but also street and book smart. He made a big deal in the 60 Minutes documentary I think, about saving Chrysler on a handshake and his word. My sense is he's a little pissed his integrity is being questioned when really he's just a killer who plays up to the line but doesn't cross i +1 Link to comment Share on other sites More sharing options...
Guest ajc Posted January 17, 2017 Share Posted January 17, 2017 On a personal note, I've maybe been as lucky as smart with FCA. Also, some further thoughts.... Their machinery was sub-par. That was obvious from the quality of their cars. When the VW scandal broke I should've put 2 and 2 together. I didn't, and assumed they were as good as the others because I trust management. I should've factored in an inability to compete in terms of upgrading technology as well as management integrity. It's unfair that poorer manufacturers get penalized because of this, but that's life. I'm not sure the Germans will break EU law to target FCA. I think that's also because the Italian public will see it as targeting based on their relative poverty. The KBA would be telling the Italian auto industry to commit suicide. Also, with Trump attacking and being told to get lost by Merkel and Hollande I think EU unity gets emphasised more. Germany suing FCA doesn't help and might anger the Italian public to the point where they vote to leave the EU. My guess is Germany and France accept for now that Italian cars are not up to the standards of the best in the world. The bigger risk might be the recent British tests on FCA vehicles, but the UK needs to be investor-friendly after Brexit so maybe not. The luckiest part of my investment has been Trump getting elected. Had Clinton been elected, the EPA likely would've gone after FCA and the Germans would've been emboldened. With Trump's election however, the EPA probably gets gutted. Extremely bad for the environment, but good for FCA. I recommend the recent NY Times article on EPA nominee Pruitt for anyone who hasn't read it. As a result of Trump and an EPA that's pro-business, I think there are some big and fortunate knock-on effects for FCA shareholders. US auto companies gain a competitive advantage because fewer environmental tech upgrades, big tax cuts, lower EPA prosecution risk, and low oil prices from tech gains in the extraction industry, all add to profitability. That starts the next cycle of stupidity in the auto industry. For the first 2 or 3 years, my estimation is it'll be a massive boost that everyone gets drunk from. US auto companies also likely want something in return for bringing jobs and investment dollars back. Trump, being a transactional personality, gives them this so even if the EPA would've had teeth under his nominee there's additional pressure to allow looser emissions standards. EU auto companies have to lobby their governments to loosen standards, cut taxes, and not prosecute them otherwise the Detroit 3 gain scale at their expense. As a result, the EU stops dishing out big fines to their national champions and makes their lives easier. My guess is the next 2 to 3 years are a boom time for US auto companies in terms of profits, lower emissions standards, and a lack of prosecution. I also think EU regulators and governments do the same for their car industries because jobs, profitability, and scale are at risk. A company like Tesla becomes an even greater risk to the existing auto industry because of their disruptive capability. How the Model 3 release goes becomes very important. I've been lucky before, so Dalal Holdings and others hopefully point out any obvious errors. Link to comment Share on other sites More sharing options...
rohitc99 Posted January 17, 2017 Share Posted January 17, 2017 Toxic emissions from cars may be several times higher than the legal limit http://www.economist.com/blogs/graphicdetail/2017/01/daily-chart-13 every car maker seems to be exceeding NOx emission levels on road v/s lab, the difference is only by what multiple. Link to comment Share on other sites More sharing options...
fareastwarriors Posted January 24, 2017 Share Posted January 24, 2017 I guess the meeting with the Pres is going well. CEOs from the 'big 3' automakers met with Trump at the White House to talk jobs http://www.businessinsider.com/trump-meets-ford-gm-fiat-chrysler-at-white-house-jobs-2017-1 Trump Tells Automakers He’ll Ease Environmental Regulations https://www.bloomberg.com/politics/articles/2017-01-23/trump-to-meet-with-ford-chrysler-and-gm-chiefs-on-tuesday Link to comment Share on other sites More sharing options...
Jurgis Posted January 24, 2017 Share Posted January 24, 2017 Trump Tells Automakers He’ll Ease Environmental Regulations Let's hope California and a bunch of other states won't. Link to comment Share on other sites More sharing options...
berkshiremystery Posted January 26, 2017 Share Posted January 26, 2017 Finally Sergio feels extremely comfortable, after seeing a good capitalist businesss environment for US car manufactures from Trump, since EPA gotten the gag order. I sense FCAU might reach very likely their EPS goals for 2018. Cheers! ----- Fiat Chrysler boss: Trump ideas positive if all implemented https://finance.yahoo.com/m/8e4e5fff-e9f1-3cb8-8e35-4e9f9ea5415f/ss_fiat-chrysler-boss%3A-trump.html Link to comment Share on other sites More sharing options...
Phaceliacapital Posted January 28, 2017 Share Posted January 28, 2017 Our friend Scotty on Fiat: https://static1.squarespace.com/static/5498841ce4b0311b8ddc012b/t/588bb3d39f74561d0b69fbb7/1485550548279/Q4+2016+FINAL_.pdf Ultimately, the decision to double down on Fiat was driven by the fact that 2018 is just around the corner. Most investors think about “forward earnings” where they are looking at the current year or the following year – only a minority of investors look two years out. Thus 2017 marks the point where the majority of investors and analysts stop ignoring 2018. Fiat was trading at less than 1.5X 2018 plan numbers last fall. Something had to give. Real companies that are debt-free don’t trade for 1.5X earnings – even if the earnings are a year away. I know I am supposed to say something conservative like, “I think we can earn an attractive return on our investment,” but the reality is that if Marchionne and team continue to execute and the new car market does not fall off a cliff, I think we can earn multiples on our investment and, as a result, made Fiat a 10+% position. I am believing. The Marchionne hype is real :D Link to comment Share on other sites More sharing options...
muscleman Posted February 1, 2017 Share Posted February 1, 2017 https://www.bloomberg.com/news/articles/2017-02-01/nissan-sales-beat-estimates-in-january-on-rogue-infiniti-gains FCAU sales fell by 11%? That's pretty big. “The year is opening with a bit of a hangover because of the extreme discounts we saw in December. It’s taking more incentives to move the metal.” Do you guys know if this is weather related? Link to comment Share on other sites More sharing options...
fareastwarriors Posted February 1, 2017 Share Posted February 1, 2017 https://www.bloomberg.com/news/articles/2017-02-01/nissan-sales-beat-estimates-in-january-on-rogue-infiniti-gains FCAU sales fell by 11%? That's pretty big. “The year is opening with a bit of a hangover because of the extreme discounts we saw in December. It’s taking more incentives to move the metal.” Do you guys know if this is weather related? Probably stopped the heavy incentives from Dec. From the article, “It’s tricky to use January as a bellwether for how auto sales will trend for the year,” “It’s the lowest volume month and only accounts for 6 percent of annual sales on average.” Link to comment Share on other sites More sharing options...
brendanb22 Posted February 1, 2017 Share Posted February 1, 2017 Has FCAU ever released what gross margin is on products like Jeep vs Chrysler? Link to comment Share on other sites More sharing options...
compounding Posted February 2, 2017 Share Posted February 2, 2017 https://www.bloomberg.com/news/articles/2017-02-01/nissan-sales-beat-estimates-in-january-on-rogue-infiniti-gains FCAU sales fell by 11%? That's pretty big. “The year is opening with a bit of a hangover because of the extreme discounts we saw in December. It’s taking more incentives to move the metal.” Do you guys know if this is weather related? They have made a revision to how they measure sales if you recall. Originally sales were 155 037 in January 2016, now they were 171 352. They also reduced fleet sales which is a factor that matters in terms of volume. To the last question in the thread, they don't disclose margins per brand (except Maserati), but you can assume they are higher for Jeep than Chrysler. Link to comment Share on other sites More sharing options...
Phaceliacapital Posted February 3, 2017 Share Posted February 3, 2017 Easy call guys!! http://video.cnbc.com/gallery/?video=3000589835&play=1 Link to comment Share on other sites More sharing options...
fareastwarriors Posted February 4, 2017 Share Posted February 4, 2017 Maserati Recalling Around 40,000 Vehicles on Risks of Fires https://www.bloomberg.com/news/articles/2017-02-04/maserati-recalling-around-40-000-vehicles-on-risks-of-fires Link to comment Share on other sites More sharing options...
Guest ajc Posted February 8, 2017 Share Posted February 8, 2017 Sold my position. I'm not sure how Fiat gets to do the tests in their own factory, on their machines, while every other manufacturer has theirs done at the official testing site. Or, according to documents that are actually from the Italian regulator, how certain Fiat vehicles simply don't get tested while every foreign manufacturer and other Fiat vehicle does get tested. Or, how the Italian regulator did none of the tests that are best for finding excess emissions. My previous thinking was the testing equipment and procedures the Italians were using were older and less in-depth, but it seems they were granting Fiat blatant, unjustifiable concessions and in some cases avoided testing them completely. I don't see how that happens without someone being knowingly corrupt within the regulator and within Fiat. I'm not a legal expert, but I think the Germans and French should sue in the European courts for an independent test based on evidence of corruption and that the regulator and Fiat should be fined. http://www.channelnewsasia.com/news/business/exclusive-italian-diesel-probe-omitted-key-tests-for-fiat-chrys/3500540.html Link to comment Share on other sites More sharing options...
investor-man Posted February 9, 2017 Share Posted February 9, 2017 Sold my position. I'm not sure how Fiat gets to do the tests in their own factory, on their machines, while every other manufacturer has theirs done at the official testing site. Or, according to documents that are actually from the Italian regulator, how certain Fiat vehicles simply don't get tested while every foreign manufacturer and other Fiat vehicle does get tested. Or, how the Italian regulator did none of the tests that are best for finding excess emissions. My previous thinking was the testing equipment and procedures the Italians were using were older and less in-depth, but it seems they were granting Fiat blatant, unjustifiable concessions and in some cases avoided testing them completely. I don't see how that happens without someone being knowingly corrupt within the regulator and within Fiat. I'm not a legal expert, but I think the Germans and French should sue in the European courts for an independent test based on evidence of corruption and that the regulator and Fiat should be fined. http://www.channelnewsasia.com/news/business/exclusive-italian-diesel-probe-omitted-key-tests-for-fiat-chrys/3500540.html Sold mine too. Same reasoning. Link to comment Share on other sites More sharing options...
bbarberayr Posted February 9, 2017 Share Posted February 9, 2017 Don't think the culture at FCA would be like VW, where you had to meet targets at all costs. Most companies, especially US ones, won't break laws for more sales as the risks are too high. Sure, they will take every advantage they can to make their products better, etc., any bending rules to a certain level, but they don't outright break the rules like VW did. Do the pollution shutdowns to protect the engine correspond with when emission tests kick in? Very possibly, but people are smart enough to build the business case for protecting the engine and would not say anything about avoiding emission laws. Link to comment Share on other sites More sharing options...
Shooter MacGavin Posted February 15, 2017 Share Posted February 15, 2017 To the FCA investors, how are you guys factoring the large number of provisions that FCA has - both the OPEB and other legal, recall and other provisions into your valuation. Are you lopping ~$24B (as of 9/30/2016) off your enterprise valuation? Is there any reason to believe that the actual provisions will prove different from what's recorded? Additionally, maybe its because i'm a GM investor, but I think that this "dieselgate" issue is going to end up be a big cash suck as a result of consumer lawsuits primarily. I don't think they've fully provided for that, obviously because they do not know the ultimate cost. But I think adding a few billion to the provisions might be prudent. Link to comment Share on other sites More sharing options...
nikhil25 Posted March 8, 2017 Share Posted March 8, 2017 Fiat Chrysler's merger options dwindle as Volkswagen rejects overtures https://www.google.com/amp/mobile.reuters.com/article/amp/idUSKBN16F14I Link to comment Share on other sites More sharing options...
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