FCAU - Fiat Chrysler Automobiles

[Sportgamma]

Fiat SpA (F) Chief Executive Officer Sergio Marchionne will not attend the International Auto Show in Frankfurt, Europe’s biggest auto event, because of “unforeseen business commitments,” the automaker said.

 

This marks the first time in recent years that Marchionne, 61, will not attend a major car show in the region. Chairman John Elkann will also not be in Frankfurt, Fiat said.

 

http://www.bloomberg.com/news/2013-09-09/fiat-chief-skips-frankfurt-show-on-unforeseen-commitments.html

 

 

Do I smell negotiations/dealmaking?

[Phaceliacapital]

They went for lunch together yesterday, had too much lobster and are now both sick in bed..

[Guest hellsten]

They went for lunch together yesterday, had too much lobster and are now both sick in bed..

 

Good news… Looks like Berlusconi and his hookers weren't involved, because FIATY is up ~5% today. A good day for Italy. Even TI is up 25%. The stars are aligning. This will be a good year :P

[plato1976]

They better reach a deal asap -

both sides don't want to wait for too long;

I think we have 30% very easy upside when the merge is clear

 

 

They went for lunch together yesterday, had too much lobster and are now both sick in bed..

 

Good news… Looks like Berlusconi and his hookers weren't involved, because FIATY is up ~5% today. A good day for Italy. Even TI is up 25%. The stars are aligning. This will be a good year :P

[fareastwarriors]

http://online.wsj.com/article/SB10001424127887324591204579037172309407990.html?mod=WSJ_hps_LEFTTopStories

 

 

Gianni Agnelli, the Godfather of Style

 

The Italian industrialist who ran Fiat during the jet-set age was one of the most stylish men of the 20th century. Many have copied his casually inventive look, but his elegance remains inimitable

[brker_guy]

 

 

http://www.autonews.com/apps/pbcs.dll/article?AID=/20130912/OEM/130919921/fiat-may-have-to-pay-top-dollar-to-avoid-chrysler-ipo-report-says#

 

A retiree health care trust will force Chrysler Group to go public unless parent Fiat S.p.A. agrees to pay top dollar -- more than $5 billion -- for the trust's stake in the automaker, several people familiar with the matter said.

[fareastwarriors]

http://online.wsj.com/article/SB10001424127887324576304579073103017763932.html?mod=WSJ_business_whatsNews

 

Chrysler This Month Could Begin Process to Go Public

 

UAW Retiree Trust With 41% Stake Wants Auto Maker to List Shares .

[LC]

how can the UAW go public with the shares when Fiat has the option to buy them at a contractually agreed upon price...

[Olmsted]

The IPO wouldn't be their whole position. Fiat has options to buy something like 16% of Chrysler, less than half the UAW VEBA's stake.

[fareastwarriors]

http://dealbook.nytimes.com/2013/09/16/marchionne-still-low-balling-chrysler/

 

Marchionne Still Low-Balling Chrysler

 

...

Fiat’s offers so far are valuing VEBA’s stake at about $2.5 billion. It could afford a more realistic price of $5 billion or more – which would still make its acquisition of Chrysler an overall bargain. Concerns about overleverage could be dealt with by raising fresh capital — either by issuing new shares or, possibly, by spinning off Ferrari.

...

[jay21]

Very good presentation from Fiat on Maseratti:  http://www.fiatspa.com/it-IT/investor_relations/investors/presentazioni/FiatDocuments/2013/MainFirst_Auto_IAA_Investor_and_Analyst_Conference_Sep_10_2013.pdf

 

We should be seeing substantial improvement this year and next:

 

http://europe.autonews.com/article/20130828/ANE/130829917/maserati-car-orders-almost-triple-on-new-models#axzz2f6hx3idV

 

"Fiat Group's Maserati brand received about 17,000 orders worldwide in the year to end-July, nearly triple the amount sold last year as new models started to attract buyers."

[Phaceliacapital]

Maserati is indeed doing very very well :)

 

Comment from Morningstar Folks on Chrysler IPO:

 

Analyst Note |  Sep 16 2013 |  Richard Hilgert

In our opinion, media reports about a Chrysler initial public offering of the United Auto Workers VEBA trust shares are a matter of brinkmanship. We were surprised to see the UAW use the media this soon in the negotiation process with Fiat FIATY, a posturing tactic it is well known for in the Detroit media.

 

Our discounted cash flow model assumes that an agreement on the VEBA stake will be reached by the middle of 2014. We factor in about $4.2 billion, or EUR 3.2 billion, in cash and debt from Fiat to the voluntary employees' beneficiary association to complete the transaction. A couple of hundred million euros in either direction would have a minimal impact on our EUR 14 fair value estimate.

 

The UAW is pressed to maximize the value of Chrysler to fund its retiree health-care account, which now has sole management of the trust, a growing liability as more Chrysler workers retire and health-care costs rise. Fiat has the obvious incentive to minimize the price it pays for the Chrysler stake due to losses in its EMEA region, an already stretched balance sheet, and substantial investment plans to renew an aging model lineup in Europe.

 

In our opinion, the price sought by the UAW VEBA is too high. According to media reports, the UAW VEBA trust is demanding that Fiat pay $5.0 billion for the stake or it will direct Chrysler to sell its stock in an IPO. This means that the UAW believes the IPO will gross more than $5.0 billion, so that after investment banking fees, the net proceeds realized will be equal to or more than the $5.0 billion price it wants for the 41.5% Chrysler stake. This values the company at an enterprise value/EBITDA multiple of 4.5 times our estimated 2013 EBITDA. We think a multiple of around 4.0 times is more reasonable and results in a $2.8 billion difference in the equity value ($12.9 billion at 4.5 times versus $10.1 billion at 4.0 times).

 

 

[fareastwarriors]

http://www.bloomberg.com/news/2013-09-17/marchionne-prepares-final-hand-in-chrysler-merger-game.html

 

Marchionne Prepares Final Hand in Chrysler Merger Game

[Phaceliacapital]

If all else fails, Marchionne still has a standing agreement to pay about $6 billion for the stake. Should the IPO market point to a higher value than that, he could exercise his option to buy at the fixed price. If investors indicate the shares are worth less than that, Marchionne would only need to offer more than the market valuation to take control.

 

Marchionne, who said last week that he’s looking to pay less than $5 billion for the holding, expects the market to apply a minority discount on the stake, said one of the people, who asked not to be identified because the discussions are private. A representative of the Italian carmaker declined to comment. Matt Wood, a spokesman for the Chrysler Veba, didn’t respond to a voice message or e-mail.

 

 

So

 

A) They negotiate a price privately < 6 bn

B) They do the IPO

B1) Investors do not apply a minority discount = the stake is bought for 6 bn

B2) Investors do apply a minority discount ==> arbritagers come in and buy at the discount because they know of the implied call that Marchionna has + his desire to buy the stake? => stake is bought for 6 bn

 

What do you guys think of this IPO strategy??

[Phaceliacapital]

Marchionne Said to Hire Obama Car Czar Bloom for Chrysler Advice

2013-09-20 01:33:37.695 GMT

 

 

By Elisa Martinuzzi, Jeffrey McCracken and Jeff Green

    Sept. 20 (Bloomberg) -- Fiat SpA Chief Executive Officer

Sergio Marchionne hired Ron Bloom, who helped run President

Barack Obama’s auto-industry team, to advise the carmaker on

buying the rest of Chrysler Group LLC, a person familiar with

the matter said.

    Bloom, now a Lazard Ltd. vice chairman, will assist the

Fiat CEO in trying to strike a deal with the United Auto

Workers’ retiree health-care trust, the only other shareholder

in Chrysler, said the person, who asked not to be identified

because the matter is private. Marchionne needs an agreement to

complete his takeover of the U.S. auto manufacturer.

    At the same time that he seeks concessions on behalf of the

Fiat boss, Bloom is advising Detroit retirees fighting benefit

cuts in the city’s $18 billion bankruptcy.

    The unrelated roles mean Bloom, 58, will be defending

worker benefits in Detroit while trying to trim them at

Chrysler. He’s had experience in both arenas. The Lazard banker

with a Harvard Business School degree worked with corporate

clients on hundreds of bankruptcies and also spent 13 years

advising the United Steelworkers union president.

    Judi Mackey, a Lazard spokesman, confirmed the Detroit

role. She declined to comment on the Fiat position.

    Bloom’s new mandates reflect his longstanding ties to the

auto industry and place him on opposite sides of the table from

officials he worked with in an earlier era.

 

                          Auto Bailout

 

    The Detroit bankruptcy role pits Bloom against Detroit

Emergency Manager Kevyn Orr, one of the lawyers for Chrysler and

Marchionne when Bloom helped lead the $80 billion bailout that

saved General Motors Co. and Chrysler in 2009. Andrew Yearley,

who negotiated opposite Bloom for the UAW during the Chrysler

bankruptcy, now will be his partner in Detroit.

    Bloom and Yearley will provide financial advice to the

committee representing Detroit retirees in the bankruptcy case.

    At Fiat, Marchionne, 61, has spent the past four years

seeking to unify the companies so they can better compete with

Toyota Motor Corp., GM and Volkswagen AG. A fully integrated

automaker would feature the mass-market Fiat, Chrysler, Jeep and

Dodge brands, along with high-end Maserati and Ferrari cars.

    Marchionne first must reach a deal that resolves a

valuation dispute with the trust, known as a voluntary employee

beneficiary association. The U.S. carmaker may file initial

public offering documents this week with the U.S. Securities and

Exchange Commission to list a 16.6 percent stake. The trust,

which owns 41.5 percent of Chrysler, has the legal right to

initiate the sale under the terms of its holding.

 

                          Treasury Deal

 

    Bloom worked closely with Marchionne in 2009 when the Fiat

CEO negotiated with the U.S. Treasury to acquire a controlling

stake in Auburn Hills, Michigan-based Chrysler. A representative

at Turin, Italy-based Fiat declined to comment.

    Bloom has been working with Marchionne for months and is

helping him understand the priorities of the UAW and the health-

care trust, the person said. Because of his longstanding ties to

labor, Bloom has also served as a backdoor channel to the UAW,

the person said.

    Fiat currently owns 58.5 percent of Chrysler. It started

accumulating the stock in 2009, building on an initial 20

percent holding received as part of a government-backed bailout

of the U.S. carmaker, which was losing as much as $100 million a

day at the time. The trust received its stake as part of the

rescue package.

 

                          Market Value

 

    Marchionne’s ultimate goal is to use the IPO process to set

a market value for the trust’s holding and force the labor group

back to the bargaining table, people familiar with the matter

said earlier this month. The trust has been holding out on

selling its Chrysler stake, seeking at least $1 billion more

than Fiat wants to pay. The two sides are in court over the

value of the initial shares that Fiat has options to buy.

    In Detroit, Bloom will need to argue against trimming

benefits. The pensioners have said the Michigan Constitution

protects the unfunded benefits from proposed cuts of as much as

90 percent in the $18 billion bankruptcy. Orr and his boss,

Michigan Governor Rick Snyder, have countered that under U.S.

bankruptcy law the police, fire and city retirees are unsecured

creditors, like bondholders, and aren’t exempt from potential

cuts.

    Bill Nowling, a spokesman for Orr, didn’t immediately

respond to an e-mail seeking comment.

    Bloom rejoined Lazard in February 2012 after resigning in

August 2011 from a White House post advising Obama on

manufacturing policy. Orr, 55, who worked on the Chrysler

restructuring, left the law firm Jones Day in March to take the

job overseeing Snyder’s takeover of Detroit.

 

                        Growing Industry

 

    The industry bailout that Bloom helped lead and Orr advised

on has produced a U.S. auto industry with sales headed for a

fifth straight year of annual increases. Chrysler has reported

41 straight months of gains, and GM has said it expects a modest

improvement over its $6.19 billion in earnings in 2012 as it

heads for its fourth consecutive annual profit. Next year, U.S.

auto sales are projected to exceed 16 million for the first time

since 2007.

    Bloom became Obama’s top manufacturing adviser after the

auto bailouts. Before joining the bailout team in 2009, Bloom

was an adviser to the United Steelworkers union and a

manufacturing specialist at Hamilton, Bermuda-based Lazard.

 

                      Defending Pensions

 

    During the auto bailouts, Bloom argued that pensions for

UAW members deserved protection even as bondholders and banks

faced cuts because the workers were necessary to build cars and

trucks once the companies exited court protection. A bankruptcy

judge supported that position.

    Detroit’s retired public workers will be represented by

nine people, including at least two union officials, on a panel

that may negotiate with the city, a U.S. trustee monitoring the

bankruptcy decided last month.

    Orr said in a July interview that a retiree committee is

needed because, unlike union members or bond investors, the

pensioners don’t have a strong organization backing them.

    Detroit retirees joined unions earlier this month in

claiming the bankruptcy law that lets municipalities seek court

protection from creditors violates the U.S. Constitution.

    The groups, which want the bankruptcy case thrown out in a

hearing next month, also point to a line in the Michigan

Constitution that says public-worker pensions are a contractual

right that cannot be undone.

    The retirees argue that Chapter 9 of the U.S. Bankruptcy

Code can’t trump a state constitution. The groups asked U.S.

Bankruptcy Judge Steven Rhodes to find either that the

bankruptcy filing doesn’t meet the tests set out in Chapter 9 or

that Chapter 9 itself violates the U.S. Constitution because it

interferes with Michigan’s sovereignty.

 

                        Bankruptcy Judges

 

    In business cases, where Orr has more experience, federal

courts have routinely upheld the power of bankruptcy judges to

impair or cancel contractual rights, even those protected by

state laws.

    Before joining Jones Day, Orr held several U.S. government

jobs, including director of the Justice Department unit that

oversees bankruptcy cases and trustees, according to the law

firm.

    As an adviser to the United Steelworkers for 13 years, and

before that as a manufacturing specialist at Lazard and his own

boutique investment firm, Bloom participated in more than 100

bankruptcies and restructurings, trying to balance the realities

of business with the need for jobs, he said in a 2010 interview.

    Marchionne praised Bloom in a 2011 interview for working

around the clock to complete the deal on Chrysler in 2009,

saying he once had a conversation with the banker on the steps

of the U.S. Treasury building during a cigarette break.

    “I asked him: what the hell are you doing here?”

Marchionne said at the time. Bloom “turned around and he said,

‘when I die, I want to be able to put on the tombstone: he made

the difference.’”

    The Detroit case is City of Detroit, 13-bk-53846, U.S.

Bankruptcy Court, Eastern District of Michigan (Detroit).

[fareastwarriors]

http://online.wsj.com/article/SB10001424127887323308504579086760224349826.html?mod=WSJ_business_whatsNews

 

 

Fiat's Marchionne Turns to Union Ally Bloom to Help With Chrysler Talks

 

 

Auto Maker Seeks Favorable Price in Negotiations With UAW .

[vpagano]

Chrysler S-1 is out:

 

http://www.sec.gov/Archives/edgar/data/1513153/000119312513374811/d564443ds1.htm#toc564443_9

[fareastwarriors]

Chrysler S-1 is out:

 

http://www.sec.gov/Archives/edgar/data/1513153/000119312513374811/d564443ds1.htm#toc564443_9

 

With all the noise at BlackBerry thread, I didn't see this earlier.

 

 

The Negotiation must be getting into the weeds by now...

 

[jay21]

If all else fails, Marchionne still has a standing agreement to pay about $6 billion for the stake. Should the IPO market point to a higher value than that, he could exercise his option to buy at the fixed price. If investors indicate the shares are worth less than that, Marchionne would only need to offer more than the market valuation to take control.

 

Marchionne, who said last week that he’s looking to pay less than $5 billion for the holding, expects the market to apply a minority discount on the stake, said one of the people, who asked not to be identified because the discussions are private. A representative of the Italian carmaker declined to comment. Matt Wood, a spokesman for the Chrysler Veba, didn’t respond to a voice message or e-mail.

 

 

So

 

A) They negotiate a price privately < 6 bn

B) They do the IPO

B1) Investors do not apply a minority discount = the stake is bought for 6 bn

B2) Investors do apply a minority discount ==> arbritagers come in and buy at the discount because they know of the implied call that Marchionna has + his desire to buy the stake? => stake is bought for 6 bn

 

What do you guys think of this IPO strategy??

 

I think the strategy is to never IPO.  The IPO process that is going on now is designed to get a market price for Marchionne to negotiate with.

 

http://online.wsj.com/article/SB10001424052702304213904579093654095921412.html?mod=pls_whats_news_us_business_f

 

"Fiat Chief Executive Sergio Marchionne, who also leads Chrysler, wants to own Chrysler outright and merge the two companies into a single auto maker. Mr. Marchionne has said a public offering could come in the first quarter of 2014, but that he wants to avoid one by buying out the union trust's holdings in a private deal. A deal between Fiat and the UAW trust could still take place before any shares are sold."

 

"However, Mr. Marchionne, as Chrysler CEO, is in the awkward situation of having to meet with investors and persuade them to pay top dollar for shares that as Fiat's CEO he would prefer to buy on the cheap."

 

My Comment:  Is there any possible meritorious case the VEBA can bring against Marchionne for breach of fiduciary duty?  I would hate to see this drag on if the price isn't right in the IPO.

 

"If Mr. Marchionne is able to gain full control of Chrysler, he could launch a new share offering for the combined company to raise money for new product investments and restructuring."

 

My Comment:  I do not see this happening with the cash he will get his hands on when Chrylser is consolidated.

[fareastwarriors]

http://blogs.wsj.com/corporate-intelligence/2013/09/23/the-chrysler-ipo-a-game-of-chicken-goes-public/?mod=WSJBlog&mod=WSJ_corp_intel

 

The Chrysler IPO: A Game of Chicken Goes Public

[mankap]

There is very good info. on the thread on FIAT.

I have started reading on FIAT.

The opportunity looks very interesting with little downside risk.

 

I am watching the game of chicken between UAW and FIAT.

I think they will agree on the price before the IPO.

[fareastwarriors]

http://online.wsj.com/article/SB10001424052702303759604579095431842965894.html?mod=WSJ_business_LeadStoryRotator

 

Fiat Needs Chrysler More Than Ever

 

Italian Auto Maker's Warning It Could Curb Ties Doesn't Hold Up.

[fareastwarriors]

http://www.bloomberg.com/news/2013-09-23/chrysler-files-for-ipo-as-fiat-seeks-deal-to-merge-automakers.html

 

Fiat Threatens Chrysler Pullback With Union-Pushed IPO

 

[CanadianMunger]

I've seen mentioned here what Fiat would do in a European nightmare scenario - distribute Chrysler and Ferrari to shareholders.

 

Now, whats the downside if, along with a nightmare European scenario, we have a nightmare North American scenario (deflation)?  Merged or not, would Chrysler/Fiat survive with the debt it has?

 

Thanks,

 

-CM

 

[Packer16]

If we have deflation in NA, the only investment that may go up is Fairfax.  I just do not see how deflation occurs with all of these QEs going on and no inclination to stop them.

 

Packer