FCAU - Fiat Chrysler Automobiles

[racemize]

I'm not sure where they are getting Ferrari being spun off.  All I got from Marchionne's comments is that it was worth a lot, which he later clarified as showing the value of Fiat, and that it was not for sale.

[muscleman]

I'm not sure where they are getting Ferrari being spun off.  All I got from Marchionne's comments is that it was worth a lot, which he later clarified as showing the value of Fiat, and that it was not for sale.

 

I am sure there will be synergies amoung Ferrari, Maserati and Alfa. I don't think it makes sense to spin off Ferrari. Just like when you ask Buffet to sell his Wells Fargo stake, he won't, no matter what price you offer him.

[Philip Morris IV]

That got me as well.  They say Marchionne "essentially committed in public" to a Ferrari spin-off, but a web search only shows media/analyst speculation and his refusal.  Our understanding was that option was a last resort if they needed capital, not actually part of the strategic plan.

 

There have been synergies since the refresh of Maserati.  Ferrari already designs the Maserati powertrains, which are also used by Alfa and will be a centerpiece in upcoming high-end Alfas.  Considering Ferrari's meaningful engineering contributions to the other marques, a full divestiture does not make much sense to me.

[LC]

It's also the crown jewel of the company, it brings instant prestige to the entire lineup. Spinning it off would be silly IMHO and I personally would have to re-evaluate the investment. Most of what I like about Fiat (aside from the low current valuation) are the brands. I think they create value long-term above and beyond what Marchionne can do with Chrysler in terms of manufacturing synergies.

[sleepydragon]

What i don't get is that in the writeup, it says EBIT goes from EUR3.8/share in 2014 to EUR9.2/share in 2018. But EPS goes from 0.52 to 4.15. How could EPS goes up so much more than EBIT? The write up says in 2018, the debt will be reduced by 4bn. But it seems even the lower interest cost won't add so much to EPS...

 

 

[peter1234]

http://www.bloomberg.com/news/2014-08-13/fiat-shorts-surge-on-concern-over-chrysler-transaction.html

[Phaceliacapital]

What i don't get is that in the writeup, it says EBIT goes from EUR3.8/share in 2014 to EUR9.2/share in 2018. But EPS goes from 0.52 to 4.15. How could EPS goes up so much more than EBIT? The write up says in 2018, the debt will be reduced by 4bn. But it seems even the lower interest cost won't add so much to EPS...

 

Share buybacks & tax are only other plausible influences..

[gokou3]

http://www.bloomberg.com/news/2014-08-13/fiat-shorts-surge-on-concern-over-chrysler-transaction.html

 

So much noises...

 

Fiat Chrysler growth plan challenged by possible merger delay

http://finance.yahoo.com/news/fiat-chrysler-growth-plan-challenged-175406589.html

 

 

And yet, the stock prices have been increasing for the past few days.  If it goes above the exit cash price, is there any more incentive to exercise the exit right?  It's becoming a "heads i win a little, tail i lose quite a bit".  Actually, I wouldn't mind the merger to fail so the stock prices would fall and I can add.

 

 

 

 

 

 

[compounding]

Ferrari-nomics: How a Sports Car Brand Engineers Record-High Prices

 

http://www.businessweek.com/articles/2014-08-14/rare-ferrari-expected-to-fetch-up-to-75-million

[ageofsocrates]

Guys,

 

Having read the FIAT thread almost in its entirety, i would urge caution and ask that you read the TSLA thread. It's probably the single biggest threat to FIAT. With FIAT being highly levered, you don't need too much for it to go wrong ie. slowing economy and technological disruption.

[TeddyLampert]

Guys,

 

Having read the FIAT thread almost in its entirety, i would urge caution and ask that you read the TSLA thread. It's probably the single biggest threat to FIAT. With FIAT being highly levered, you don't need too much for it to go wrong ie. slowing economy and technological disruption.

 

Socrates,

 

Would you mind just providing maybe a sentence or two on why you've identified TSLA as a threat? I once tried to read through 500 pages of Sears postings and got to 200 before stopping. I'm not being lazy here with TSLA, just scarred  :P

 

Thanks in advance.

 

[ageofsocrates]

a few points

-highly rated car (consumer reports ranks it 99 out of 100)

-excellent management (Musk)

-Gigafactory (once it comes online in a couple of years, it will drive the cost of Tesla's lithium ion batteries substantially. Such batteries account for a large bulk of a telsa's cost)

-Launch of model X (priced for mass market consumers)

-Direct selling model (no dealers)

-low maintenance cost for electric cars

-expanding supercharger network for teslas

 

In all, it's means a lot more competition for FIAT in North America where it derives the majority of its revenues.

 

[phil_Buffett]

a few points

-highly rated car (consumer reports ranks it 99 out of 100)

-excellent management (Musk)

-Gigafactory (once it comes online in a couple of years, it will drive the cost of Tesla's lithium ion batteries substantially. Such batteries account for a large bulk of a telsa's cost)

-Launch of model X (priced for mass market consumers)

-Direct selling model (no dealers)

-low maintenance cost for electric cars

-expanding supercharger network for teslas

 

In all, it's means a lot more competition for FIAT in North America where it derives the majority of its revenues.

 

 

you have to be real :D you cant compete tesla vs fiat. tesla is maybe a great Company but big time overvalued. ok great the make good Progress with their electric car. but they have one car! 1! nothing more. all big automakers are now in Research of their own great electric car. if i compare the i8 from BMW with the tesla i choose the i8. so what if all great automakers have a electric supercar. the tesla is nice but a joke in comparison to a Mercedes oder BMW i8.

 

and to say that tesla is a threat to fiat, i cant understand that Point. fiat is maserati, ferrari allone. if i have the Chance to own ferrari i would do everything to own it. what do i want with a overvalued tesla Company?

 

tesla is bringing more competition to North america, for sure. but how much cars to the sell? and would People who buy a big nice Grand cherokee buy a tesla? i understand that a lot of People what tesla do, it is for sure a nice Thing. also that they bring in the electric car more to public.

 

but in the end i would buy fiat and especially at today Prices. what a great Company. Sergio as ceo the best. than the assets! amazing! and that cheap Price!

 

 

[ageofsocrates]

my main point is that Tesla would pose a threat to Fiat's sales in North America. Not advocating buying tsla. it's definitely way overvalued.  But important to consider any outlier that potentially can kill the Fiat investment idea

[phil_Buffett]

my main point is that Tesla would pose a threat to Fiat's sales in North America. Not advocating buying tsla. it's definitely way overvalued.  But important to consider any outlier that potentially can kill the Fiat investment idea

 

sure it can sometimes in the future take away sales in North america. but right now tesla has one car. maybe two to three in the next 2years. so this is for me not a threat. the fiat Thesis is that in the next 2 years fiat reaches a fair value of around 12-20€ so i have around 100-200% (bought in the 6€ Region)

 

my check list for this to happen is:

 

assets big time undervalued

nice assets to own (ferrari, maserati, Jeep and so on)

pent up demand in North america and europe bottom

great leadership  Sergio, John elkann so on

financial undervalued ( so not only the assets, also the financials say undervalued)

debt high but not a high yield and workable

nice new cars ( so the have not only nice assets the also bring new amazing cars out)

 

so i can make this Money on fiat. tesla is not important for me. sometimes maybe the are a big competitor in North america who knows. this is not interesting for me. fiat is now big time undervalued.  who knows what in 5 years from now is? maybe Mercedes or Audi have the coolest electric car at that time. it doesnt matter for me.

 

[jay21]

a few points

-highly rated car (consumer reports ranks it 99 out of 100)

-excellent management (Musk)

-Gigafactory (once it comes online in a couple of years, it will drive the cost of Tesla's lithium ion batteries substantially. Such batteries account for a large bulk of a telsa's cost)

-Launch of model X (priced for mass market consumers)

-Direct selling model (no dealers)

-low maintenance cost for electric cars

-expanding supercharger network for teslas

 

In all, it's means a lot more competition for FIAT in North America where it derives the majority of its revenues.

 

Thanks, always good to think about the competitive landscape years in the future.  I'll start reading more about Tesla

 

I am not sure that the average consumer will embrace no a dealer model.  Also, it doesn't appear that Tesla competes with the most important segments of Chrysler: Ram and Jeep.

[sleepydragon]

tesla is probabbly stalled in china now. and i heard it has some quality issues, like leaking moon roofs.

[sleepydragon]

today's reaction is likely due to Credit Suisse 's research.

--------

 

Initiation: No more positive surprises?

■ Initiating with Underperform rating, TP €6.0: Despite CEO Marchionne's

successes over the past 10 years, including simplification of the share

structure, divesting the industrial business, and acquiring 100% of Chrysler,

we see limited scope now to positively surprise on corporate action. While

CNH's experience indicates that a US listing for Fiat Chrysler is unlikely to

change investor perceptions, we also see limited upside in its key US,

LatAm and European markets. Our EPS estimates are 10% and 5% below

consensus for 2014E and 2015E, respectively.

■ We think the group's many positives (Jeep, Ferrari, Maserati and Alfa) are

outweighed by near-term market risks and an unsustainable level of net debt

for a global OEM of €9.7bn. The five-year plan to 2018 also appears too

optimistic, and there is potential downside to 2014 guidance given a weak

H1. Moreover, we view the planned US listing as a first step towards a

possible capital increase, limiting EPS upside potential.

■ Fiat has been routinely cited as a potential merger partner with Peugeot or

VW (e.g. FT, 24 July). However, we think the rationale for a PSA

combination was lost when Chrysler was acquired. VW has also ruled out

further acquisitions, while we don't see any merit to the notion that Ferrari

and Maserati could exist without the scale of a volume brand. A partial IPO

of Ferrari would be taken positively in our view, but we see little appetite

among management or shareholders for such a move.

■ Catalyst: The exercise period on the merger exit rights closes on 20 August

(we expect results announced after August 25); Q3 results on 30 October.

■ Valuation: Fiat trades on 8.3x 2015E EPS and 3.0x EV/EBITDA which is in

line with the average sector multiples. Our SOTP-based TP is €6. Our Credit

Suisse HOLT® model values Fiat Chrysler at €6.46.

 

------------

Fiat Spa is the automotive slice of the original pie with the industrial divisions CNH and

Iveco trucks hived off in January 2011. While a great strategic move for the Industrial

division, it left Fiat exposed to a loss making and cash burning European automotive unit,

a previously highly profitable South American business and now 100% of Chrysler of

which it plans to merge with, but cannot access its balance sheet until restrictive bonds

have been refinanced – deemed uneconomical prior to 2015. NAFTA and Chrysler are

now the biggest profit driver but Fiat also has the Ferrari and Maserati premium brands

and an auto supplier division.

Variant view: Over the past 10 years, CEO Marchionne has succeeded in simplifying the

share structure, divesting the CNH industrial business and acquiring 100% of Chrysler

without a significant outlay of cash. With a potential US listing lined up next, we believe the

scope for further transformation is now limited. CNH has shown that a US listing is

unlikely to change investor perception towards a stock with its history, management and

majority shareholders based in Italy. Moreover, we view the US listing as a possible first

step towards some form of capital increase, limiting any upside EPS potential, although

the company maintains a capital increase is not needed (5-year plan, 6 May). We also see

limited upside in FCA's key US market and weakness in LatAm and European markets

over the next 18 months. Moreover, €9.7bn of industrial debt remains onerous for a global

OEM and, without a global financial services business, we see little benefit from LTRO 3.

With the US listing, previous MIB30 support will be lost.

We note the ongoing media reports about a potential merger with Peugeot or VW (e.g. the

FT, 24 July). However, PSA told Reuters it "categorically denies" the FT report, and we

think the rationale for a PSA combination was lost when Chrysler was acquired. While we

would never rule out M&A with regard to Fiat, a potential PSA tie-up appears even less

likely given the prospect of cutting capacity in France and/or Italy would be difficult to

digest for both the French and Italian governments/unions. VW also ruled out any further

acquisitions recently and we put a two year time horizon on this statement while it

concentrates on internal issues. Moreover, we don't see any merit to the notion that

Ferrari and Maserati could exist longer term without the scale of a volume brand; a lack of

scale ahead of onerous new European emission legislation was the industrial logic behind

Porsche SE's failed bid for VW. We think a partial IPO of Ferrari would be taken positively,

but we see little appetite by management or shareholders for such a move.

Event path / catalysts: Fiat was up +55% in 2013, outperforming the SXAP by 20% on

the back of improved sentiment towards a Euroland recovery, normalisation of credit

spreads, a move into beta names and on hope of Fiat achieving 100% of Chrysler in 2013.

The latter was achieved on January 1, 2014 which helped drive the stock 42% higher in

2014 Q1 together with strong European monthly sales and high expectations into the CMD

on May 6. Disappointing quarterly results, the apparent ruling out of a Ferrari IPO and an

overly optimistic, in our view, 5 year plan now leaves the stock with unsustainable debt

levels for a global OEM and a risk of missing FY EBIT guidance of €3.6-4.0bn given only

€1.2bn in H1. We fail to see the US listing as a positive catalyst and the possibility of some

form of capital increase provides further downside EPS risk. European car sales were

+5.5% in 2014H1 and we forecast +3% for the full year which implies a flat H2 market with

continued Fiat EMEA losses. LatAm is likely to remain weak although comparatives will

become easier in H2 and we see limited US growth beyond the current SAAR of 16.8m.

Valuation: Fiat is unlikely to benefit further from the surge in positive macro sentiment and

the shift to beta that drove SXAP names in 2013 and 2014Q1. Indeed, it now holds 100%

of Chrysler and the ability to positively surprise on corporate action is limited as well as

Fiat seeking a US listing by October 2014. Recent quarterly earnings have also

disappointed; we see downside risks to numbers and guidance. Fiat trades on c.8.3x our

2015E EPS or 9% sector premium, and 3.0x EV/EBITDA. We value the stock using SOTP

which gives us our €6.0 target price.

 

[sleepydragon]

both Credit Suisse and Merrill has underperform ratings on Fiat. Merrill's underperform rating has been there for a while, during which period the stock is up 50%.

Goldman sachs suspended their fiat rating since Dec 2013, due to "there are legal, regulatory or policy constraints related to publishing research on this company as a result of a proposed initial public offering of

an affiliate of the company". So they are probably helping fiat with the IPO.

 

[bmichaud]

Looks like Fiat's biggest champion is better at producing detailed, complex analyses than producing alpha.

 

http://www.gwinvestors.com/Main/Blog/Entries/2014/8/14_Second_Quarter_Investor_Letter.html

 

Yikes

[GregS]

Re: TSLA, I have tremendous respect for what they are doing but don't see it as a threat to Fiat right now.  The competition is brutal in the auto industry, and I don't own Fiat because it is the world's best auto maker.  I own it because it is an undervalued asset.  There really very few true franchises in autos.  One of those is Ferrari, which is reasonably estimated to be worth half Fiat's stock price, possibly more.  But I don't think you should own Fiat because you think Jeep has a big moat - they are executing great right now and have more room to grow, but competition could knock them out just like any other carmaker.  Maybe Tesla is a new franchise, maybe not, but it I don't think it matters for Fiat for the next few years.

 

Fiat is undervalued because:

- Luxury franchises Ferrari and Maserati are worth a big chunk of the stock price.

- Taking share in North America with strong models

- Still close to low point in cycle for North America and especially Europe.

- Operating leverage due to increased sales, absorbing excess capacity

- Operating leverage due to scale/synergies with Chrysler

- Option value of growth from Maserati and/or Alfa

- First tier management

 

Tesla can take away share, but so can Ford, GM, Mercedes, Audi, etc.  I believe Fiat is priced right for 2-3x upside vs. limited downside.  Debt a big risk but I think there is valuation support from the luxury brands.

[sleepydragon]

I am guessing that it appears Fiat will likely use Goldman for the IPO?

 

1. Goldman's research no longer cover Fiat due to "policy" reason.

2. Goldman's ex-partner became a new board member in June 2014:

http://online.wsj.com/articles/fiat-approves-sale-of-5-42-billion-in-bonds-1402862579

 

Also, here is a conference held at Goldman on Dec 2013, right before when Goldman suspended their Fiat coverage:

 

http://www.fiatspa.com/en-US/investor_relations/investors/presentazioni/FiatDocuments/2013/GS_Annual_Global_Automotive_Conference_London_December_5_2013).pdf

 

Now I can see why Merrill and Credit Suisse have no good thing to say. They are in the VW gang.

[fareastwarriors]

Fiat-Chrysler Faces Bend in the Road

 

Italian Auto Maker Will Find Out If It Garnered Enough Support to Reorganize the Group

 

 

 

http://online.wsj.com/articles/fiat-chrysler-faces-bend-in-the-road-1408932802

[investor-man]

Fiat-Chrysler Faces Bend in the Road

 

Italian Auto Maker Will Find Out If It Garnered Enough Support to Reorganize the Group

 

 

 

http://online.wsj.com/articles/fiat-chrysler-faces-bend-in-the-road-1408932802

 

Anyone want to do investor-man a favor and post a screen shot?

[wbr]

Fiat-Chrysler Faces Bend in the Road

 

Italian Auto Maker Will Find Out If It Garnered Enough Support to Reorganize the Group

 

 

 

http://online.wsj.com/articles/fiat-chrysler-faces-bend-in-the-road-1408932802

 

Anyone want to do investor-man a favor and post a screen shot?

 

You can Ctrl+C the headline and google it and you will always see the full article.