FCAU - Fiat Chrysler Automobiles

[Phaceliacapital]

(BN) Fiat Judge Seen Leaving Marchionne in Lurch Over Chrysler (

1)

 

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Fiat Judge Seen Leaving Marchionne in Lurch Over Chrysler (1)

2013-06-20 07:29:07.813 GMT

 

 

    (Updates with today’s share trading in seventh paragraph.)

 

By Jef Feeley, Phil Milford and Tommaso Ebhardt

    June 20 (Bloomberg) -- Fiat SpA’s Sergio Marchionne may

have to wait months longer than planned to learn the price of

shares he needs to complete his purchase of Chrysler Group LLC.

    Fiat, the Turin, Italy-based automaker, asked Delaware

Chancery Court Judge Donald Parsons, 64, last year to rule that

a call-option agreement covering some shares held by a United

Auto Workers’ retiree health-care trust are worth $139.7

million. The trust puts the value as high as $342 million.

    Parsons, who is considering the matter based on pretrial

filings by the two sides, is likely to call for a trial, where

witnesses and experts can be questioned and cross-examined,

before placing a value on the shares, said Charles Elson,

director of the John L. Weinberg Center for Corporate Governance

at the University of Delaware. That would add months to a

process Marchionne had estimated would be completed by the end

of September.

    The judge would “want to take the time to get all the

information” in a trial, Elson said in an interview.  “He’s a

very careful judge.”

    A decision, either valuing the shares or forcing a trial,

could come as soon as next month, although there’s no solid

deadline.

    Marchionne, chief executive officer of both Fiat and Auburn

Hills, Michigan-based Chrysler, said this month that he expected

a ruling on the option value by the “third quarter at the

latest.” A Fiat representative declined to comment further on

the chancery proceeding beyond Marchionne’s statement about the

timing.

 

                          Shares Fall

 

    Fiat dropped as much as 11 cents, or 2 percent, to 5.43

euros and traded down 1.2 percent as of 9:26 a.m. in Milan. The

stock has gained 45 percent this year, valuing the Italian

automaker at 6.85 billion euros ($9.1 billion).

    A decision by Parsons that the valuation dispute must go to

trial may push back a final ruling on the stock’s value for as

long as a year, said Larry Hamermesh, a Widener University

professor who specializes in Delaware corporate law.

    “Since the parties still have to depose witnesses and get

ready for trial, it would be incredibly fast to get that all

done in six months. I’d say nine to 12 months is more

realistic,” the Delaware-based professor said. A trial “is the

most likely scenario,” he said.   

Marchionne, 61, has spent the past four years working to

unify the companies so they can better compete with Toyota Motor

Corp., General Motors Co. and Volkswagen AG. He has said the

push to acquire the UAW trust’s shares is part of the

unification effort.

 

                          ‘Not Good’

 

    “Uncertainty over Chrysler is not good,” said Philippe

Houchois, an automotive analyst with UBS AG in London. “It’s

not good for a company to have shareholders arguing, and

Marchionne is very aware of those things.” Houchois said he

thinks a deal can still be reached by the end of the year. Fiat

may pay as much as $4.5 billion for the entire 41.5 percent

holding, UBS estimates.

    Chrysler has become Fiat’s reliable profit generator as the

Italian company struggles to end losses in Europe, which totaled

704 million euros last year.

    Marchionne has been counting on Chrysler and its 38

straight monthly U.S. sales gains to offset losses at Fiat’s

mass-market brands in Europe. Chrysler’s share of the U.S.

market has risen for three straight years, reaching 11.4 percent

in 2012, according to researcher Autodata Corp. Chrysler’s 2012

sales in its home market climbed 21 percent to 1.65 million

vehicles.

    Chrysler reported first-quarter net income of $166 million

and maintained its forecast for full-year revenue of $72 billion

to $75 billion and net income of about $2.2 billion.

 

                          $10 Billion

 

    Fiat may raise as much as $10 billion from banks to

increase its stake in Chrysler and to refinance both companies’

debt, people familiar with the matter said in May. As part of

those talks, Marchionne may refinance $5.65 billion in loans for

Fiat and Chrysler as soon as tomorrow, people familiar with the

matter said last week.

    Marchionne, who wants to merge the two carmakers “as soon

as possible,” must first buy the remaining 41.5 percent in

Chrysler from the union’s trust. Fiat already owns 58.5 percent.

Marchionne said this month that talks with the fund are

“fundamentally” about price. He aims to buy the holding by the

end of the summer, the people said last month.

    Marchionne said this month that Fiat was in talks with the

union about buying its stake and is seeking to complete a deal

before a potential Chrysler initial public offering requested by

the union is held.

 

                      Interpreting Formulas

 

    The judge was asked to interpret the call-option

agreement’s formulas for valuing the first block of the UAW

trust’s stock up for sale, comprising more than 54,000 shares.

    The agreement covers more than 270,000 shares in all, about

17 percent of the trust’s stake. Fiat Chairman John Elkann has

said they are looking to Parsons to provide a benchmark. The

trust’s entire Chrysler stake totals 670,000 shares.

    The UAW trust’s lawyers argue the valuation formulas aren’t

clear and need interpretation. The union’s calculations put the

block of more than 54,000 shares at as much as $342 million,

more than twice Fiat’s estimate.

    Fiat acquired a stake in Chrysler in June 2009 after the

U.S. carmaker sought bankruptcy protection from creditors and

accepted more than $8 billion in financing help from the U.S.

and Canadian governments.

    As part of Chrysler’s Chapter 11 reorganization, the union

health-care trust wound up with the Chrysler stake and

promissory notes in exchange for wiping out retiree claims

against the carmaker in the bankruptcy case.

 

                        Health Provider

 

    The UAW’s Retiree Medical Benefits Trust provides health-

care services to more than 800,000 retired workers from

Chrysler, GM and Ford Motor Co. and their dependents, according

to the trust’s website. It’s the largest nongovernmental

purchaser of retiree health services in the U.S.

    Fiat sued the UAW trust last year, alleging union officials

reneged on promises to let the carmaker buy shares subject to

the agreement at a value set by the accord. The agreement gives

Fiat the right to purchase a portion of the trust’s shares every

six months through June 2016.

    The case turns on the agreement’s methods for assessing the

shares’ value. The valuation formulas are based, in part, on

Chrysler’s reported earnings before interest, taxes,

depreciation and amortization for the four most recent financial

quarters, minus the carmaker’s “net industrial debt” as listed

on its most recent financial statement, according to court

filings.

 

                        ‘Borrowed Money’

 

    The UAW argued in court papers that Fiat shouldn’t include

the promissory notes from the bankruptcy case in Chrysler’s debt

calculations. The notes don’t meet the call-option agreement’s

definition of “borrowed money” and improperly lowered the

carmaker’s value, the UAW contended. That adversely affected the

value of the trust’s shares, the union said.

    Fiat said the notes met the definition of borrowed funds

and were properly included in the debt calculations.

    At a hearing in April, Parsons said he was “kind of

leaning” toward the union’s position on the debt calculations

while indicating he wasn’t swayed by the UAW’s arguments that

the shares should be sold at current fair-market value,

according to court filings.

    Parsons considered requests by Fiat and the union for

judgments “on the pleadings” for different questions in the

case during the April hearing. Such motions are made in hope of

winning a case without suffering the time and expense of a

trial.

 

                        Agreement’s Terms

 

    Parsons could agree with Fiat’s position that the option

agreement’s terms are unambiguous and rule the block of 54,000

shares is worth $139.7 million, said Randall Thomas, a

Vanderbilt University professor of law and business who follows

Delaware corporate cases.

    “Chancery court judges do decide cases on motions for

judgment,” Thomas said in an interview.

    If Parsons opts for a trial, he could put the case on track

for expedited discovery, accelerating the exchange of evidence

between the parties, which means it could be ready for a full

hearing within two to three months, Thomas added.

    Elson, of the University of Delaware, doesn’t anticipate

that happening. Given the complexities of the valuation case and

the fact that “there’s a lot of money involved,” Elson said he

didn’t expect Parsons to decide at the pretrial stage.

    “It’s a very complex case,” Elson said. “These kinds of

cases take time.”    The case is Fiat North America LLC v. UAW Retiree Medical

Benefits Trust, CA No. 7903, Delaware Chancery Court

(Wilmington).

[LC]

The judge really seemed to be out of his comfort zone when trying to interpret what various financial terms were. UAW is playing hardball...prolonging this as long as possible so hopefully the price of the comparable firms will increase, thus increasing the price of Chrysler.

[PlanMaestro]

Fiat is getting its own factory reps for dealers

http://www.autonews.com/article/20130624/RETAIL07/306249996#ixzz2XAtIxJbF

 

500 too small? Larger 500L to the rescue

http://www.autonews.com/article/20130617/OEM03/306179984#ixzz2XAuKLutC

 

[Guest valueInv]

(BN) Fiat Judge Seen Leaving Marchionne in Lurch Over Chrysler (

1)

 

+------------------------------------------------------------------------------+

 

Fiat Judge Seen Leaving Marchionne in Lurch Over Chrysler (1)

2013-06-20 07:29:07.813 GMT

 

 

    (Updates with today’s share trading in seventh paragraph.)

 

By Jef Feeley, Phil Milford and Tommaso Ebhardt

    June 20 (Bloomberg) -- Fiat SpA’s Sergio Marchionne may

have to wait months longer than planned to learn the price of

shares he needs to complete his purchase of Chrysler Group LLC.

    Fiat, the Turin, Italy-based automaker, asked Delaware

Chancery Court Judge Donald Parsons, 64, last year to rule that

a call-option agreement covering some shares held by a United

Auto Workers’ retiree health-care trust are worth $139.7

million. The trust puts the value as high as $342 million.

   

 

So what happens in the scenario where the Judge values the options at $342 M? How does this effect the ability of Fiat to buy the remaining (non option) stake? How does it effect the price of that stake?

[vpagano]

Electric Fiat 500e sold out in California:

 

http://wardsauto.com/north-america/fiat-500e-sold-out

[jch548]

Been reading things haven't been getting any better in Europe. Alix Partners estimates 58 of the largest auto-assembly plants in Europe are operating below 75% capacity vs 39 last year.

The article stated Fiat's Mirafiori plant was only operating at 16% capacity and was the least utilized plant.

[jch548]

Dated but relevant article......

 

 

Reconstruction works at Fiat Mirafiori plant can finally start.

 

23 March 2012 12:09  No comments

 

 

Mirafiori Reconstruction works at Fiat Mirafiori plant can finally start.

 

The Mirafiori plant near Turin, historically one of Fiat’s most import production sites, is ready for the long awaited reconstructions. This means employees who have spent most of their time at home last year, now can look  forward to a more productive and certain future. Recently the Italian labour unions Fim, Uilm, Fismc, Ugl Mettalmeccanici di Torino and the Associazione Quadri all signed an agreement basically implementing the Pomigliano d’ Arco ‘World Class Manufacturing’ procedure: last year Fiat already signed a new national agreement for a restructured Pomigliano d’Arco production schedule, replacing the turbulent ‘Fabbrica Italia’ plans. Mirafiori is Europe’s largest car plant, but only managed a maximum car production of 300 per day in 2011. An all-time record low.

 

The Italians initially didn’t have any hopes for a turn-around. Back in 2010 there were already downsizing plans for Mirafiori but one of the more tougher and bigger unions (CGIL-Fiom) showed a lot of resistance. Recently they indicated, yet again, not to sign the new industrial plans. It now seems times are changing in Italy, and they have to.  Greater economic problems that suffocate the entire country are having its effects on the traditionally stubborn unions. Although these might be the first fruitful steps towards a more cost-efficient Italian production, Sergio Marchionne in his role of ACEA chairman, commented in Belgium that European car manufacturers still have to make more sacrifices in terms of cutting production. This would inevitably mean a stagnating period followed by a more flourishing one in which the EU will be more competitive in terms of (over)capacity.

 

Mirafiori 1 Reconstruction works at Fiat Mirafiori plant can finally start.

 

Going back to the situation in Italy, Marchionne knows what he’s talking about as the Termini Imerese plant closed last year (goes to Italian manufacturer DR) and several financial measures have already been taken. Fiat’s ‘cut’ and open policy therefore is an example for other EU car companies. According to Marchionne this is especially the case for the French and (partly) German car industry. The global economic downfall now also has its effect on China, the second largest economy in the world where industrial production has fallen to a four-month low and weakening domestic demand will surely result in more efficiency and flexibility. FGA demonstrates they’re not in a denial stage.

 

In the near future Mirafiori will be ready for a larger production than currently is the case. About 5,300 employees will gradually return to the factory. By September 2013, Mirafiori can concentrate on the production of two entirely new cars: a compact Jeep SUV and a Fiat SUV (500X). At the moment production of the Alfa Romeo MiTo and Lancia Musa still continuous but Fiat won’t say for how long. A new compact Alfa Romeo will propbably make its way to Mirafiori, but that will have to wait for another year.

 

[jay21]

The One U.S. Automaker Still Stuck in Neutral

 

http://finance.yahoo.com/blogs/the-exchange/one-u-automaker-still-stuck-neutral-171449249.html

 

I am long this as of a week ago.

[txlaw]

Ferrari-Fueled Maserati at $65,600 Lures Bored BMW Buyers

 

http://www.bloomberg.com/news/2013-06-27/ferrari-fueled-maserati-at-65-600-lures-bored-bmw-buyers.html

 

Gotta say, though, I do not understand why they picked the name Ghibli.  Every time I read it, I think of the Japanese animation studio, which has a weird creature as its mascot: https://en.wikipedia.org/wiki/Studio_Ghibli

[vpagano]

A solid review below, I know in my area the Porsche Panamera sold like crazy as an alternative to the classic BMW or Mercedes. This will have the same effect...."entry-level" Italian!

 

http://www.autoblog.com/2013/06/26/2014-maserati-ghibli-review-first-drive/

 

By the way Ghibli is a classic name, the original was popular and I believe I read it outsold Ferrari and Lamborghini.

[ERICOPOLY]

Ferrari-Fueled Maserati at $65,600 Lures Bored BMW Buyers

 

http://www.bloomberg.com/news/2013-06-27/ferrari-fueled-maserati-at-65-600-lures-bored-bmw-buyers.html

 

Gotta say, though, I do not understand why they picked the name Ghibli.  Every time I read it, I think of the Japanese animation studio, which has a weird creature as its mascot: https://en.wikipedia.org/wiki/Studio_Ghibli

 

Funny, Ghibli is a scirocco, a VW car.

 

[vpagano]

Fiat ready to exercise option for another 3.3% of Chrysler:

 

http://www.reuters.com/article/2013/06/27/fiat-chrysler-option-idUSL5N0F33BW20130627

[Philip Morris IV]

There have been two Ghiblis actually.  As far as I know, the Ghibli II ('92-'97) was never offered in North America.  Very rare to find one here.  It looks like a Volvo 440 but the engine was highly unique: a tiny 2.0L V6, but fitted with twin-turbochargers.  Basically had the power of a V8 with half the volume/mass.

 

At first glance the Ghibli III looks exciting.  That biturbo V6 is a very promising engine, and the design is slick inside and out.

[PlanMaestro]

Maserati names first SUV Levante at the Paris auto show

http://www.autoweek.com/article/20120927/PARIS/120929835

 

At peak capacity, Maserati plans to build 20,000 to 25,000 units a year of the Levante, about 20,000 units of the Ghibli and 12,000 Quattroportes. The company's GranTurismo coupe and the GranCabrio convertible, which are made at Maserati's home plant in Modena, Italy, round out the range.

 

I think this was mentioned before, but the Levante will be made in Italy not Jefferson that is at full capacity.

http://www.readability.com/articles/otpgnuft

 

 

[PlanMaestro]

Ghibli reviews.

 

http://www.automobilemag.com/reviews/driven/1306_2014_maserati_ghibli/

http://www.topgear.com/uk/car-news/maserati-ghibli-first-drive-2013-06-27

http://www.caranddriver.com/reviews/2014-maserati-ghibli-first-drive-review

http://www.telegraph.co.uk/motoring/car-manufacturers/maserati/10146075/Maserati-Ghibli-review.html

http://www.edmunds.com/maserati/ghibli/2014/road-test.html

[Phaceliacapital]

Nice, so far so good

[PlanMaestro]

Why Fiat must race to launch Jeep output in China > Jeep, what a brand

 

http://europe.autonews.com/article/20130701/BLOG15/306289990/why-fiat-must-race-to-launch-jeep-output-in-china#axzz2XqyqoKVP

[Guest hellsten]

Chrysler Group LLC, the third-largest U.S. automaker, extended its streak of U.S. sales gains in June and predicted demand in its largest market will keep growing even if accommodative monetary policy is scaled back.

…

Chrysler’s U.S. sales have gained for 39 consecutive months, boosting an auto market that’s on pace for its best year since 2007 as Americans replace the oldest vehicles ever on U.S. roads. Pent-up demand, attractive financing offers and an improving economy will keep propelling industry sales as the Federal Reserve winds down its unprecedented easing programs, said Reid Bigland, Chrysler’s U.S. sales chief.

 

http://www.bloomberg.com/news/2013-07-02/chrysler-extends-streak-of-monthly-u-s-sales-gains.html

[fareastwarriors]

is it too late to get on the FIAT train (or car)?

[Phaceliacapital]

For me FV > 10 so dunno?

[Packer16]

Fiat is still considerably cheaper on a CF basis than GM who is cheaper than the other automakers (except Renault and Pegeut which I would stay away from, because of the European exposure).  Fiat with Chrysler will sell about 50% in Us, 25% in Brazil and the rest in Europe.  Morningstar pegs FV at $19 so it has a good amount of upside and the NA market is finally at normalized levels but there are almost 12m units of pent-up demand so the momentum should last a few more years for all of thise in the NA market.

 

Packer

[jch548]

WSJ today reported that auto registrations were down again yoy for June. France seemed the worst as I recall. Italy was down. Excluding corporate Spain was actually improving.

 

Europe is a mess. All the excess capacity and related price competition.

 

There was another story relating how U.S. auto manufacturers are very competitive as companies are producing here to export overseas.

[txlaw]

Jeep might be the most "patriotic" brand in the US:

http://www.usatoday.com/story/driveon/2013/07/01/most-patriotic-brands-jeep/2481337/

[PlanMaestro]

Worldwide clamor for Jeep, but most vehicles U.S.-made

http://www.toledoblade.com/Automotive/2012/11/04/Worldwide-clamor-for-Jeep-but-most-vehicles-U-S-made.html#4X5uJTAFJSOWDOJe.99

[PlanMaestro]

Fiat-Chrysler to build 280,000 Fiat and Jeep small SUVs in Italy

http://www.autonews.com/article/20130704/ANE/130709955#ixzz2Y7OHaN9b

 

Fiat and Jeep will join the hot small SUV segment, which is forecast to grow to 500,000 sales in Europe by 2015, up from 154,461 last year, according to consultancy IHS Automotive. In the first five months of this year, segment-leader Nissan sold 48,043 Jukes, up from 44,379 during the same period last year. Meanwhile the Opel/Vauxhall Mokka ranked second with sales of 32,342, according to market analysts JATO Dynamics.

 

Fiat intends to introduce 19 Italy-produced models through 2016, including nine Alfa Romeo-badged vehicles and six Maseratis. The carmaker plans to increase production of Fiat and Chrysler cars in Europe to 2 million cars a year by 2016 up from a planned 1.2 million this year.