FCAU - Fiat Chrysler Automobiles

[valueinvestor]

Down 10%" I get that there will be a macro environment that may or may not come, but Fiat explained the case where if SAAR decreased to almost 2008 level, they still break even or make a profit. Also the pending special dividend, sale of robotic arm division with the initiation of a regular dividend still makes this cheap.

[Shooter MacGavin]

2018 was not a great year.  The only reason they made their Adj. EBIT guidance for the 5 year plan is due to  aggressive non-GAAP accounting, in my opinion. 1.5B of non-GAAP adjustments - with the diesel emissions being about half that.  They made the bottom line in part due to the tax cut, and Richard stashing a big tax reserve.

 

The stock is of course fairly cheap, but the fact that Maserati fell off a cliff and APAC is loss making is fairly worrying.  I'll need to listen to the call.

[valueinvestor]

2018 was not a great year.  The only reason they made their Adj. EBIT guidance for the 5 year plan is due to  aggressive non-GAAP accounting, in my opinion. 1.5B of non-GAAP adjustments - with the diesel emissions being about half that.  They made the bottom line in part due to the tax cut, and Richard stashing a big tax reserve.

 

The stock is of course fairly cheap, but the fact that Maserati fell off a cliff and APAC is loss making is fairly worrying.  I'll need to listen to the call.

 

For this investment to work, Fiat does not really need to do great. There's so many low-hanging fruit, that good and sound management will result in a great stock price.

 

What's also appealing that if a downturn does happen, Fiat is ripe to be opportunistic, however the caveat is the stock price will probably crash by 50%.

[John Hjorth]

... There's so many low-hanging fruit, ...

 

What are you referring to here, valueinvestor?

[Shooter MacGavin]

2018 was not a great year.  The only reason they made their Adj. EBIT guidance for the 5 year plan is due to  aggressive non-GAAP accounting, in my opinion. 1.5B of non-GAAP adjustments - with the diesel emissions being about half that.  They made the bottom line in part due to the tax cut, and Richard stashing a big tax reserve.

 

The stock is of course fairly cheap, but the fact that Maserati fell off a cliff and APAC is loss making is fairly worrying.  I'll need to listen to the call.

 

For this investment to work, Fiat does not really need to do great. There's so many low-hanging fruit, that good and sound management will result in a great stock price.

 

What's also appealing that if a downturn does happen, Fiat is ripe to be opportunistic, however the caveat is the stock price will probably crash by 50%.

 

The lowest hanging fruit here is the stock price. But they 're not committing to a buyback but instead talking about a dividend, which I don't understand.  I guess it's not too different in theory if I just take my dividends and buy more FCAU, except for the tax leakage. 

[Sportgamma]

2018 was not a great year.  The only reason they made their Adj. EBIT guidance for the 5 year plan is due to  aggressive non-GAAP accounting, in my opinion. 1.5B of non-GAAP adjustments - with the diesel emissions being about half that.  They made the bottom line in part due to the tax cut, and Richard stashing a big tax reserve.

 

The stock is of course fairly cheap, but the fact that Maserati fell off a cliff and APAC is loss making is fairly worrying.  I'll need to listen to the call.

 

For this investment to work, Fiat does not really need to do great. There's so many low-hanging fruit, that good and sound management will result in a great stock price.

 

What's also appealing that if a downturn does happen, Fiat is ripe to be opportunistic, however the caveat is the stock price will probably crash by 50%.

 

The lowest hanging fruit here is the stock price. But they 're not committing to a buyback but instead talking about a dividend, which I don't understand.  I guess it's not too different in theory if I just take my dividends and buy more FCAU, except for the tax leakage.

 

Here's a thought: FCA & Exor's aim might be to go for a merger with one of the other big players. With a deflated equity valuation, they would have a worse negotiating position. In an attempt to get their valuation on par with the targets they might want to combine with, they may have opted for a regular dividend payment as opposed to a big buyback.

[TwoCitiesCapital]

2018 was not a great year.  The only reason they made their Adj. EBIT guidance for the 5 year plan is due to  aggressive non-GAAP accounting, in my opinion. 1.5B of non-GAAP adjustments - with the diesel emissions being about half that.  They made the bottom line in part due to the tax cut, and Richard stashing a big tax reserve.

 

The stock is of course fairly cheap, but the fact that Maserati fell off a cliff and APAC is loss making is fairly worrying.  I'll need to listen to the call.

 

For this investment to work, Fiat does not really need to do great. There's so many low-hanging fruit, that good and sound management will result in a great stock price.

 

What's also appealing that if a downturn does happen, Fiat is ripe to be opportunistic, however the caveat is the stock price will probably crash by 50%.

 

The lowest hanging fruit here is the stock price. But they 're not committing to a buyback but instead talking about a dividend, which I don't understand.  I guess it's not too different in theory if I just take my dividends and buy more FCAU, except for the tax leakage.

 

 

Ahhh, see, but Exor is doing the buyback and is at a cheaper NAV than FCAU is.

 

You have to consider this from the controlling shareholder. They want to maximize returns, but they also want a liquidity event. 

 

How can they do that? Buyback stock of Exor, which is at a 40% discount to it's already cheap assets like FCAU, while kicking our dividends from those cheap assets.

 

Of course, they could sell/merge Fiat too, but they've been rebuffed on multiple attempts. The decision makes sense from Exor's point of view.

 

[Spekulatius]

I believe the decision of a dividend vs buyback is driven by Exor. Exor wants to diversify or buy back stock and that’s easier when they get cash from FCAU rather than an increased share in FCAU, which would force than to either tender or outright sell FCAU stock to do so. A tender/ sale by Exor would also lead to fairness issues and be perceived negative for FCAU, imo.

[Shooter MacGavin]

2018 was not a great year.  The only reason they made their Adj. EBIT guidance for the 5 year plan is due to  aggressive non-GAAP accounting, in my opinion. 1.5B of non-GAAP adjustments - with the diesel emissions being about half that.  They made the bottom line in part due to the tax cut, and Richard stashing a big tax reserve.

 

The stock is of course fairly cheap, but the fact that Maserati fell off a cliff and APAC is loss making is fairly worrying.  I'll need to listen to the call.

 

For this investment to work, Fiat does not really need to do great. There's so many low-hanging fruit, that good and sound management will result in a great stock price.

 

What's also appealing that if a downturn does happen, Fiat is ripe to be opportunistic, however the caveat is the stock price will probably crash by 50%.

 

The lowest hanging fruit here is the stock price. But they 're not committing to a buyback but instead talking about a dividend, which I don't understand.  I guess it's not too different in theory if I just take my dividends and buy more FCAU, except for the tax leakage.

 

Here's a thought: FCA & Exor's aim might be to go for a merger with one of the other big players. With a deflated equity valuation, they would have a worse negotiating position. In an attempt to get their valuation on par with the targets they might want to combine with, they may have opted for a regular dividend payment as opposed to a big buyback.

 

While I don't dispute any of this is true, economically speaking, doesn't it just make sense for FCAU to buyback all of its shares until Exor is the last remaining shareholder? Would only take three years for Exor to own 95% of the economic ownership of the  company at today's price (or for the stock to dramatically rise in value, either way)  At that point Exor would have access to a $6B growing annuity that can then shrink Exor in the following 2.5 years! until Elkann is the only remainder shareholder!  What a great return for him.

 

Certainly, that is a much better return than trying to get "the stock to rise" and then sell it.   

[TwoCitiesCapital]

2018 was not a great year.  The only reason they made their Adj. EBIT guidance for the 5 year plan is due to  aggressive non-GAAP accounting, in my opinion. 1.5B of non-GAAP adjustments - with the diesel emissions being about half that.  They made the bottom line in part due to the tax cut, and Richard stashing a big tax reserve.

 

The stock is of course fairly cheap, but the fact that Maserati fell off a cliff and APAC is loss making is fairly worrying.  I'll need to listen to the call.

 

For this investment to work, Fiat does not really need to do great. There's so many low-hanging fruit, that good and sound management will result in a great stock price.

 

What's also appealing that if a downturn does happen, Fiat is ripe to be opportunistic, however the caveat is the stock price will probably crash by 50%.

 

The lowest hanging fruit here is the stock price. But they 're not committing to a buyback but instead talking about a dividend, which I don't understand.  I guess it's not too different in theory if I just take my dividends and buy more FCAU, except for the tax leakage.

 

Here's a thought: FCA & Exor's aim might be to go for a merger with one of the other big players. With a deflated equity valuation, they would have a worse negotiating position. In an attempt to get their valuation on par with the targets they might want to combine with, they may have opted for a regular dividend payment as opposed to a big buyback.

 

While I don't dispute any of this is true, economically speaking, doesn't it just make sense for FCAU to buyback all of its shares until Exor is the last remaining shareholder? Would only take three years for Exor to own 95% of the economic ownership of the  company at today's price (or for the stock to dramatically rise in value, either way)  At that point Exor would have access to a $6B growing annuity that can then shrink Exor in the following 2.5 years! until Elkann is the only remainder shareholder!  What a great return for him.

 

Certainly, that is a much better return than trying to get "the stock to rise" and then sell it. 

 

It would make sense if Exor was owned entirely by the family, but it's not. It would also make sense if they wanted MORE concentration, but they seem to be gearing for less.

 

So Exor can slowly increase their holdings of their family wealth vehicle, decrease outside ownership, remain MORE diversified, and get a better price on repurchases by buying back their own stock versus FCAU doing so. I just don't see buybacks happening here.

[cubsfan]

I would like to FCAU buyback stock as well with excess cash instead of issuing dividends, but I thought the real issue

is that the Agnelli family, long term, just wants out (or way reduced exposure) to the car business.

[Shooter MacGavin]

2018 was not a great year.  The only reason they made their Adj. EBIT guidance for the 5 year plan is due to  aggressive non-GAAP accounting, in my opinion. 1.5B of non-GAAP adjustments - with the diesel emissions being about half that.  They made the bottom line in part due to the tax cut, and Richard stashing a big tax reserve.

 

The stock is of course fairly cheap, but the fact that Maserati fell off a cliff and APAC is loss making is fairly worrying.  I'll need to listen to the call.

 

For this investment to work, Fiat does not really need to do great. There's so many low-hanging fruit, that good and sound management will result in a great stock price.

 

What's also appealing that if a downturn does happen, Fiat is ripe to be opportunistic, however the caveat is the stock price will probably crash by 50%.

 

The lowest hanging fruit here is the stock price. But they 're not committing to a buyback but instead talking about a dividend, which I don't understand.  I guess it's not too different in theory if I just take my dividends and buy more FCAU, except for the tax leakage.

 

Here's a thought: FCA & Exor's aim might be to go for a merger with one of the other big players. With a deflated equity valuation, they would have a worse negotiating position. In an attempt to get their valuation on par with the targets they might want to combine with, they may have opted for a regular dividend payment as opposed to a big buyback.

 

While I don't dispute any of this is true, economically speaking, doesn't it just make sense for FCAU to buyback all of its shares until Exor is the last remaining shareholder? Would only take three years for Exor to own 95% of the economic ownership of the  company at today's price (or for the stock to dramatically rise in value, either way)  At that point Exor would have access to a $6B growing annuity that can then shrink Exor in the following 2.5 years! until Elkann is the only remainder shareholder!  What a great return for him.

 

Certainly, that is a much better return than trying to get "the stock to rise" and then sell it. 

 

It would make sense if Exor was owned entirely by the family, but it's not. It would also make sense if they wanted MORE concentration, but they seem to be gearing for less.

 

So Exor can slowly increase their holdings of their family wealth vehicle, decrease outside ownership, remain MORE diversified, and get a better price on repurchases by buying back their own stock versus FCAU doing so. I just don't see buybacks happening here.

 

The concentration argument, if true, is not rational.  Buying back EXOR stock with FCA dividends only somewhat dilutes your concentration in a less optimal way but at the larger detriment of of your wealth, since you're buying more of the thing that still has FCA! as a large part of its NAV.  There is an easier way to be less concentrated.  Have FCA buyback stock - either your price goes way up or you have access to a giant dividend in 3 years (under the scenario that the stock stays flat), and then either buy other things with your $6B dividend annuity OR the stock skyrockets (which is more likely) and sell your FCA stock at a much better valuation and be less concentrated. 

 

I haven't done the exact math -  but I believe that the FCA buyback path can address the concentration and value maximization issue in a more rational manner.  You never see Malone or Buffett ever pay a dividend for a reason. 

[TwoCitiesCapital]

2018 was not a great year.  The only reason they made their Adj. EBIT guidance for the 5 year plan is due to  aggressive non-GAAP accounting, in my opinion. 1.5B of non-GAAP adjustments - with the diesel emissions being about half that.  They made the bottom line in part due to the tax cut, and Richard stashing a big tax reserve.

 

The stock is of course fairly cheap, but the fact that Maserati fell off a cliff and APAC is loss making is fairly worrying.  I'll need to listen to the call.

 

For this investment to work, Fiat does not really need to do great. There's so many low-hanging fruit, that good and sound management will result in a great stock price.

 

What's also appealing that if a downturn does happen, Fiat is ripe to be opportunistic, however the caveat is the stock price will probably crash by 50%.

 

The lowest hanging fruit here is the stock price. But they 're not committing to a buyback but instead talking about a dividend, which I don't understand.  I guess it's not too different in theory if I just take my dividends and buy more FCAU, except for the tax leakage.

 

Here's a thought: FCA & Exor's aim might be to go for a merger with one of the other big players. With a deflated equity valuation, they would have a worse negotiating position. In an attempt to get their valuation on par with the targets they might want to combine with, they may have opted for a regular dividend payment as opposed to a big buyback.

 

While I don't dispute any of this is true, economically speaking, doesn't it just make sense for FCAU to buyback all of its shares until Exor is the last remaining shareholder? Would only take three years for Exor to own 95% of the economic ownership of the  company at today's price (or for the stock to dramatically rise in value, either way)  At that point Exor would have access to a $6B growing annuity that can then shrink Exor in the following 2.5 years! until Elkann is the only remainder shareholder!  What a great return for him.

 

Certainly, that is a much better return than trying to get "the stock to rise" and then sell it. 

 

It would make sense if Exor was owned entirely by the family, but it's not. It would also make sense if they wanted MORE concentration, but they seem to be gearing for less.

 

So Exor can slowly increase their holdings of their family wealth vehicle, decrease outside ownership, remain MORE diversified, and get a better price on repurchases by buying back their own stock versus FCAU doing so. I just don't see buybacks happening here.

 

The concentration argument, if true, is not rational.  Buying back EXOR stock with FCA dividends only somewhat dilutes your concentration in a less optimal way but at the larger detriment of of your wealth, since you're buying more of the thing that still has FCA! as a large part of its NAV.  There is an easier way to be less concentrated.  Have FCA buyback stock - either your price goes way up or you have access to a giant dividend in 3 years (under the scenario that the stock stays flat), and then either buy other things with your $6B dividend annuity OR the stock skyrockets (which is more likely) and sell your FCA stock at a much better valuation and be less concentrated. 

 

I haven't done the exact math -  but I believe that the FCA buyback path can address the concentration and value maximization issue in a more rational manner.  You never see Malone or Buffett ever pay a dividend for a reason.

 

No, but you do see them take up dividends from their subsidiaries which is all this is.

[Sportgamma]

2018 was not a great year.  The only reason they made their Adj. EBIT guidance for the 5 year plan is due to  aggressive non-GAAP accounting, in my opinion. 1.5B of non-GAAP adjustments - with the diesel emissions being about half that.  They made the bottom line in part due to the tax cut, and Richard stashing a big tax reserve.

 

The stock is of course fairly cheap, but the fact that Maserati fell off a cliff and APAC is loss making is fairly worrying.  I'll need to listen to the call.

 

For this investment to work, Fiat does not really need to do great. There's so many low-hanging fruit, that good and sound management will result in a great stock price.

 

What's also appealing that if a downturn does happen, Fiat is ripe to be opportunistic, however the caveat is the stock price will probably crash by 50%.

 

The lowest hanging fruit here is the stock price. But they 're not committing to a buyback but instead talking about a dividend, which I don't understand.  I guess it's not too different in theory if I just take my dividends and buy more FCAU, except for the tax leakage.

 

Here's a thought: FCA & Exor's aim might be to go for a merger with one of the other big players. With a deflated equity valuation, they would have a worse negotiating position. In an attempt to get their valuation on par with the targets they might want to combine with, they may have opted for a regular dividend payment as opposed to a big buyback.

 

While I don't dispute any of this is true, economically speaking, doesn't it just make sense for FCAU to buyback all of its shares until Exor is the last remaining shareholder? Would only take three years for Exor to own 95% of the economic ownership of the  company at today's price (or for the stock to dramatically rise in value, either way)  At that point Exor would have access to a $6B growing annuity that can then shrink Exor in the following 2.5 years! until Elkann is the only remainder shareholder!  What a great return for him.

 

Certainly, that is a much better return than trying to get "the stock to rise" and then sell it. 

 

It would make sense if Exor was owned entirely by the family, but it's not. It would also make sense if they wanted MORE concentration, but they seem to be gearing for less.

 

So Exor can slowly increase their holdings of their family wealth vehicle, decrease outside ownership, remain MORE diversified, and get a better price on repurchases by buying back their own stock versus FCAU doing so. I just don't see buybacks happening here.

 

The concentration argument, if true, is not rational.  Buying back EXOR stock with FCA dividends only somewhat dilutes your concentration in a less optimal way but at the larger detriment of of your wealth, since you're buying more of the thing that still has FCA! as a large part of its NAV.  There is an easier way to be less concentrated.  Have FCA buyback stock - either your price goes way up or you have access to a giant dividend in 3 years (under the scenario that the stock stays flat), and then either buy other things with your $6B dividend annuity OR the stock skyrockets (which is more likely) and sell your FCA stock at a much better valuation and be less concentrated. 

 

I haven't done the exact math -  but I believe that the FCA buyback path can address the concentration and value maximization issue in a more rational manner.  You never see Malone or Buffett ever pay a dividend for a reason.

 

No, but you do see them take up dividends from their subsidiaries which is all this is.

 

● Goal is to provide clarity on two issues that have been raised publicly by FCA

          ● Industry has not earned its cost of capital over a cycle

          ● Consolidation is the key to remedying the problem

 

 

- Confessions of a Capital Junkie

 

https://www.autonews.com/assets/PDF/CA99316430.PDF

[TwoCitiesCapital]

● Goal is to provide clarity on two issues that have been raised publicly by FCA

          ● Industry has not earned its cost of capital over a cycle

          ● Consolidation is the key to remedying the problem

 

 

- Confessions of a Capital Junkie

 

https://www.autonews.com/assets/PDF/CA99316430.PDF

 

+1. Probably why they'd rather take the capital out and allocate to share repurchases at Exor instead of continuing to grow an allocation to an industry that hasn't yet been persuaded of the truths in that document.

[John Hjorth]

Please see Gísli's [sportgamma's] post in the EXOR topic from December 13^th 2018 and the nice spreadsheet set up by Gísli, plus the discussion in the following posts in the EXOR topic. EXOR is so to say "double" cheap [both discount on FCAU and a conglomerate discount on EXOR]. So I consider it somehow a no-brainer what Mr. Elkann has done with the proceeds. It's somehow from the Capital Allocation ABC.

 

The concentration argument has merit though, so it somehow also depends on who you are and where you want to go.

 

This post just to elaborate a bit on my question about "low hanging fruit" earlier.

[compounding]

Please see Gísli's [sportsgamma's] post in the EXOR topic from December 13^th 2018 and the nice spreadsheet set up by Gísli, plus the discussion in the following posts in the EXOR topic. EXOR is so to say "double" cheap [both discount on FCAU and a conglomerate discount on EXOR]. So I consider it somehow a no-brainer what Mr. Elkann has done with the proceeds. It's somehow from the Capital Allocation ABC.

 

The concentration argument has merit though, so it somehow also depends on who you are and where you want to go.

 

This post just to elaborate a bit on my question about "low hanging fruit" earlier.

 

Exor also has: a reinsurance company that is currently breaking even and they may have overpaid for, Ferrari valued at 26x earnings, a newspaper and a football club. Exor might be a cheap stock, but it isn't a pure, cheap derivative of Fiat-Chrysler.

[Sportgamma]

Exor also has: a reinsurance company that is currently breaking even and they may have overpaid for, Ferrari valued at 26x earnings, a newspaper and a football club. Exor might be a cheap stock, but it isn't a pure, cheap derivative of Fiat-Chrysler.

 

Absolutely. Exor will give you exposure to FCU, but to a larger extent, exposure to something else. Also, one should not expect that the Exor conglomerate discount will go away. You can expect Elkann to act opportunistically and aggressively buying back Exor when the discount is wide (as is the case now).

 

Since becoming the capo of the Agnellis, Elkann has shown willingness to be very flexible in terms of capital allocation. Elkann & co are definitely not agnostic to buybacks and still, they opt for a dividend at FCU. There must be a reason for that. I posit that they are building currency. They have gone through the 5-year plan, they fixed the balance sheet, next move is to pursue a merger.

[benchmark]

Down 10%" I get that there will be a macro environment that may or may not come, but Fiat explained the case where if SAAR decreased to almost 2008 level, they still break even or make a profit. Also the pending special dividend, sale of robotic arm division with the initiation of a regular dividend still makes this cheap.

 

is there a timeline for the dividend?

[valueinvestor]

Down 10%" I get that there will be a macro environment that may or may not come, but Fiat explained the case where if SAAR decreased to almost 2008 level, they still break even or make a profit. Also the pending special dividend, sale of robotic arm division with the initiation of a regular dividend still makes this cheap.

 

is there a timeline for the dividend?

 

I am not aware of one yet, but I think it will happen after the magnetti marelli sale closes, which is expected to happen during the first half of 2019.

[Bluedevilvalue]

Anybody dig into earnings? At first glance, Maserati sales cratering and capex guidance increases this late in a cycle are concerning. However, I haven't seen anything that would nullify my bull thesis.

 

Given the challenging macro environment, the continued robustness of the overall business is compelling. With the special dividend coming up and ongoing strategic sales, I'm still bullish. Although, if you're looking at a SOTP, the value of maserati may have to be ratcheted down. With that being said, I think the maserati brand is still strong. They've just made some product / selling missteps.

[LC]

I personally would not hang my hat on the Maserati brand. Especially not compared to Jeep for example. Not surprising sales are volatile - they are a nouveau riche brand.

 

The move is to conservatively value Alfa & Maserati. If FACU is still undervalued with these conservative estimates, you can win two ways: 1) general re-valuation and 2) upside surprises to these conservative estimates.

 

Obviously there are other factors at work which I am leaving out.

 

I'm speaking in generalities because I am out of the auto space (too entrenched, too much "national industry" biases - all lead to lack of common sense) - but that would be my approach if I were to invest here.

[DTEJD1997]

Hey all:

 

Anybody else notice that FCAU has declared a dividend today?

 

Dividend will be about $.75/share.

 

https://finance.yahoo.com/news/fca-announces-dividend-distribution-191207434.html

 

No mention made if this is the quarterly payout, one time payout, or something else.

 

No mention was made of the sale of Magnetti-Marelli either.

 

Stock is up $.10/share.

[undervalued]

Read like a one time dividend to me

[Gray Fox]

The plan had always been for Euro 2bn special dividend and now its Euro 1bn??? The excerpt below is from the conference call.  Maybe the board pushed back??  After tax proceeds on MM were 6bn and they specifically earmarked 2bn of that for a special dividend.  This is way too high to be the quarterly dividend which they want to be at a 20% payout ratio.  Seems weird to me.

 

 

Richard K. Palmer

CFO & Head of Business Development

Yes, well, the dividends will be confirmed as we go through the AGM, which is the middle of April. So

that's the timeline. And so far what we've talked about is our dividend policy through the plan for ordinary

dividends will be 20% of net income overall through the plan period. And the special dividend related t

 

 

https://www.sec.gov/Archives/edgar/data/1605484/000160548419000012/a99102212019_fcanv.htm