FCAU - Fiat Chrysler Automobiles

[SwimmingNaked]

This is crazy. Company can most likely do 3.5+ bill in FCF this year and mkt cap is 8.2 billion euros. ~13 billion in EBITDA - ~9.5 billion capex, plus cash dropping down from WC. Look at the sellside models that have been posted here, they are so out of whack. Goldman has Jeep sales peaking out at under 1.6 million. They have NAFTA margins at 6.5% when Sergio has stated he doesn't know a reason why they would be under 7% for '16. All these models are getting margins and debt laughably wrong. People continue questioning the plan when it is clear the plan targets and assumptions as initially laid out were actually conservative (Alfa and Maserati aside).

 

I don't know if the selloff is because of strategy concerns, I think it is more due to the super conservative guidance they've given.

[Chalk bag]

Look, it's balls-to-wall levered with a super inefficient balance sheet while spreads are blowing out, is betting its fortune on oil staying where it is, US SAAR is peaking w/ over-supply concerns -- leading to pricing & margin headwind while everyone is still adding capacity and stuffing channels, LatAm is a disaster (not their fault), China got a temporary boost but who knows what's going on there, CapEx intensity isn't going down (they always draw pies in the sky like this, think about the Alfa Romeo plan), and the squeezed the hell out of suppliers this year to get that FCF (It's a big working capital / funding boost). They have even debt maturity all the way to 2018 (uber-sensitive to refinancing market, better pray debt market doesn't close on them), and god knows when they are executing what's going to happen to EV + Autonomous driving, which I think all of these OEMs are woefully behind on despite recognizing the problem. Maybe Europe is a saving grace to some extent, and the shares aren't that expensive on a EV/EBITDA or PE basis, but you never never never buy these hypercyclicals on those numbers. This is a zero or hero trade and I see a ton of headwinds against them, let alone the long-term paradigm-shifting threat. If there is a gun to my head, I would rather bet on Fiat being a donut than a 20 dollar stock 3-4 years out.

 

And this is coming from a guy who was bullish the name in early 2014. Skilled operators and silver-tongued negotiator being dealt a crap hand in a value-destructing industry. They are doing the best they can.

[goldfinger]

Look, it's balls-to-wall levered with a super inefficient balance sheet while spreads are blowing out, is betting its fortune on oil staying where it is, US SAAR is peaking w/ over-supply concerns -- leading to pricing & margin headwind while everyone is still adding capacity and stuffing channels, LatAm is a disaster (not their fault), China got a temporary boost but who knows what's going on there, CapEx intensity isn't going down (they always draw pies in the sky like this, think about the Alfa Romeo plan), and the squeezed the hell out of suppliers this year to get that FCF (It's a big working capital / funding boost). They have even debt maturity all the way to 2018 (uber-sensitive to refinancing market, better pray debt market doesn't close on them), and god knows when they are executing what's going to happen to EV + Autonomous driving, which I think all of these OEMs are woefully behind on despite recognizing the problem. Maybe Europe is a saving grace to some extent, and the shares aren't that expensive on a EV/EBITDA or PE basis, but you never never never buy these hypercyclicals on those numbers. This is a zero or hero trade and I see a ton of headwinds against them, let alone the long-term paradigm-shifting threat. If there is a gun to my head, I would rather bet on Fiat being a donut than a 20 dollar stock 3-4 years out.

 

And this is coming from a guy who was bullish the name in early 2014. Skilled operators and silver-tongued negotiator being dealt a crap hand in a value-destructing industry. They are doing the best they can.

 

You also forgot that Marchionne is not a car guy!

[arcube]

Look, it's balls-to-wall levered with a super inefficient balance sheet while spreads are blowing out, is betting its fortune on oil staying where it is, US SAAR is peaking w/ over-supply concerns -- leading to pricing & margin headwind while everyone is still adding capacity and stuffing channels, LatAm is a disaster (not their fault), China got a temporary boost but who knows what's going on there, CapEx intensity isn't going down (they always draw pies in the sky like this, think about the Alfa Romeo plan), and the squeezed the hell out of suppliers this year to get that FCF (It's a big working capital / funding boost). They have even debt maturity all the way to 2018 (uber-sensitive to refinancing market, better pray debt market doesn't close on them), and god knows when they are executing what's going to happen to EV + Autonomous driving, which I think all of these OEMs are woefully behind on despite recognizing the problem. Maybe Europe is a saving grace to some extent, and the shares aren't that expensive on a EV/EBITDA or PE basis, but you never never never buy these hypercyclicals on those numbers. This is a zero or hero trade and I see a ton of headwinds against them, let alone the long-term paradigm-shifting threat. If there is a gun to my head, I would rather bet on Fiat being a donut than a 20 dollar stock 3-4 years out.

 

And this is coming from a guy who was bullish the name in early 2014. Skilled operators and silver-tongued negotiator being dealt a crap hand in a value-destructing industry. They are doing the best they can.

 

You're clueless.

 

Care to explain (w/o asking us to go through the long thesis) why he/she is clueless while bringing up some really valid points.

 

[investor-man]

Look, it's balls-to-wall levered with a super inefficient balance sheet while spreads are blowing out, is betting its fortune on oil staying where it is, US SAAR is peaking w/ over-supply concerns -- leading to pricing & margin headwind while everyone is still adding capacity and stuffing channels, LatAm is a disaster (not their fault), China got a temporary boost but who knows what's going on there, CapEx intensity isn't going down (they always draw pies in the sky like this, think about the Alfa Romeo plan), and the squeezed the hell out of suppliers this year to get that FCF (It's a big working capital / funding boost). They have even debt maturity all the way to 2018 (uber-sensitive to refinancing market, better pray debt market doesn't close on them), and god knows when they are executing what's going to happen to EV + Autonomous driving, which I think all of these OEMs are woefully behind on despite recognizing the problem. Maybe Europe is a saving grace to some extent, and the shares aren't that expensive on a EV/EBITDA or PE basis, but you never never never buy these hypercyclicals on those numbers. This is a zero or hero trade and I see a ton of headwinds against them, let alone the long-term paradigm-shifting threat. If there is a gun to my head, I would rather bet on Fiat being a donut than a 20 dollar stock 3-4 years out.

 

And this is coming from a guy who was bullish the name in early 2014. Skilled operators and silver-tongued negotiator being dealt a crap hand in a value-destructing industry. They are doing the best they can.

 

You're clueless.

 

Care to explain (w/o asking us to go through the long thesis) why he/she is clueless while bringing up some really valid points.

 

I won't continue the name calling (I like this board because there is relatively little of that) but I will say that Chalk bag did mention he thought FCAU may be a good short in an earlier post. I just think betting against the best CEO in the industry is a bad idea. There have got to be better short ideas out there than this

[LC]

Look, it's balls-to-wall levered with a super inefficient balance sheet while spreads are blowing out, is betting its fortune on oil staying where it is, US SAAR is peaking w/ over-supply concerns -- leading to pricing & margin headwind while everyone is still adding capacity and stuffing channels, LatAm is a disaster (not their fault), China got a temporary boost but who knows what's going on there, CapEx intensity isn't going down (they always draw pies in the sky like this, think about the Alfa Romeo plan), and the squeezed the hell out of suppliers this year to get that FCF (It's a big working capital / funding boost). They have even debt maturity all the way to 2018 (uber-sensitive to refinancing market, better pray debt market doesn't close on them), and god knows when they are executing what's going to happen to EV + Autonomous driving, which I think all of these OEMs are woefully behind on despite recognizing the problem. Maybe Europe is a saving grace to some extent, and the shares aren't that expensive on a EV/EBITDA or PE basis, but you never never never buy these hypercyclicals on those numbers. This is a zero or hero trade and I see a ton of headwinds against them, let alone the long-term paradigm-shifting threat. If there is a gun to my head, I would rather bet on Fiat being a donut than a 20 dollar stock 3-4 years out.

 

And this is coming from a guy who was bullish the name in early 2014. Skilled operators and silver-tongued negotiator being dealt a crap hand in a value-destructing industry. They are doing the best they can.

 

You're clueless.

 

Care to explain (w/o asking us to go through the long thesis) why he/she is clueless while bringing up some really valid points.

 

I won't continue the name calling (I like this board because there is relatively little of that) but I will say that Chalk bag did mention he thought FCAU may be a good short in an earlier post. I just think betting against the best CEO in the industry is a bad idea. There have got to be better short ideas out there than this

He does put forth the comprehensive bear case though. And I agree with many of his arguments.

 

That said, they're not as good of an argument as ad hominem attacks but we can't all be masters of both logical thought and rhetoric as arcube is.  8)

[Spekulatius]

I agree with you guys, in the past years the media has always used <1% of the transcript to spin a certain story...

 

(Full disclosure: I have (considerable) endowment bias.)

 

I think the average car buyer will not care whether stuff like the "autopilot" is made by Google, Apple, Tesla.. They care about whether it crashes or not, right?

 

I think the software or brain of the future self driving car will be a main differentiator. It is expected that you get to your destination in one piece, but it also is expected that you get there in an efficient manner, without spilling you coffee or maybe even in a sporty manor, if the driver wishes.

[Picasso]

Look, it's balls-to-wall levered with a super inefficient balance sheet while spreads are blowing out, is betting its fortune on oil staying where it is, US SAAR is peaking w/ over-supply concerns -- leading to pricing & margin headwind while everyone is still adding capacity and stuffing channels, LatAm is a disaster (not their fault), China got a temporary boost but who knows what's going on there, CapEx intensity isn't going down (they always draw pies in the sky like this, think about the Alfa Romeo plan), and the squeezed the hell out of suppliers this year to get that FCF (It's a big working capital / funding boost). They have even debt maturity all the way to 2018 (uber-sensitive to refinancing market, better pray debt market doesn't close on them), and god knows when they are executing what's going to happen to EV + Autonomous driving, which I think all of these OEMs are woefully behind on despite recognizing the problem. Maybe Europe is a saving grace to some extent, and the shares aren't that expensive on a EV/EBITDA or PE basis, but you never never never buy these hypercyclicals on those numbers. This is a zero or hero trade and I see a ton of headwinds against them, let alone the long-term paradigm-shifting threat. If there is a gun to my head, I would rather bet on Fiat being a donut than a 20 dollar stock 3-4 years out.

 

And this is coming from a guy who was bullish the name in early 2014. Skilled operators and silver-tongued negotiator being dealt a crap hand in a value-destructing industry. They are doing the best they can.

 

Well said. It's always telling when a stock goes down and investors keep regurgitating low P/E's on metrics that are likely to change for the worst in a few years. The stock is just beginning to price that in so of course it still looks cheap.  It'll stay cheap all the way to a donut.  It can still end up being a $20 stock but the probability of that happening is dropping each week.

[jouni1]

What is a donut?  ::)

[sampr01]

I think everyone pointing out PEAK US autosales, but Sergio pointed out that world is a larger place than we see from Detroit. I think FCA focusing on growth outside of US.

[jay21]

Look, it's balls-to-wall levered with a super inefficient balance sheet while spreads are blowing out, is betting its fortune on oil staying where it is, US SAAR is peaking w/ over-supply concerns -- leading to pricing & margin headwind while everyone is still adding capacity and stuffing channels, LatAm is a disaster (not their fault), China got a temporary boost but who knows what's going on there, CapEx intensity isn't going down (they always draw pies in the sky like this, think about the Alfa Romeo plan), and the squeezed the hell out of suppliers this year to get that FCF (It's a big working capital / funding boost). They have even debt maturity all the way to 2018 (uber-sensitive to refinancing market, better pray debt market doesn't close on them), and god knows when they are executing what's going to happen to EV + Autonomous driving, which I think all of these OEMs are woefully behind on despite recognizing the problem. Maybe Europe is a saving grace to some extent, and the shares aren't that expensive on a EV/EBITDA or PE basis, but you never never never buy these hypercyclicals on those numbers. This is a zero or hero trade and I see a ton of headwinds against them, let alone the long-term paradigm-shifting threat. If there is a gun to my head, I would rather bet on Fiat being a donut than a 20 dollar stock 3-4 years out.

 

And this is coming from a guy who was bullish the name in early 2014. Skilled operators and silver-tongued negotiator being dealt a crap hand in a value-destructing industry. They are doing the best they can.

 

Similar thoughts (but not exact). If it wasnt for Jeep and Ram, this would not even be tempting. The R/R might be there but the risk seems severe. And the reward may not be as high as some bulls think due to structural reasons rather than valuation.

 

Disclosure: Long thinking of selling.

[kab60]

This is crazy. Company can most likely do 3.5+ bill in FCF this year and mkt cap is 8.2 billion euros. ~13 billion in EBITDA - ~9.5 billion capex, plus cash dropping down from WC. Look at the sellside models that have been posted here, they are so out of whack. Goldman has Jeep sales peaking out at under 1.6 million. They have NAFTA margins at 6.5% when Sergio has stated he doesn't know a reason why they would be under 7% for '16. All these models are getting margins and debt laughably wrong. People continue questioning the plan when it is clear the plan targets and assumptions as initially laid out were actually conservative (Alfa and Maserati aside).

 

I don't know if the selloff is because of strategy concerns, I think it is more due to the super conservative guidance they've given.

 

13b Ebitda, 9,5b capex and 3,5b FCF is exactly what's keeping me away. This industry sucks capital like there's no tomorrow. Not saying this won't turn out well for investors because it all might be more than discounted at these levels (it might be a multibagger with the amount of operating and financial leverage), but boy this industry could use some consolidation.

[rohitc99]

Gross debt = 30 Bn

Cash and securities = 21.3 Bn

Industrial debt = 6 Bn

Post ferrari demerger = 5 Bn

Ring fence to be eliminated in Q1

 

EBIT around 5 Bn for 2016

Components business can be sold for 3-4 Bn if needed

 

Why does everyone say that the company is highly levered ? What am i missing here ?

[Chalk bag]

Donut = 0. although one is probably sweeter than the other =(

 

Inefficient balance sheet as a large pile of debt and large pile of cash. With bond call some ring-fencing goes away but they are still stuck with a run-rate of 1.7-2 Bn interest in FY16. They also have 10 Bn of underfunded pension that I didn't mention.

 

And why are they running with so much cash? ring-fencing is part of it but the massively negative working capital is key here. Fiat collects its trade receivables in 10 days. But it only pays its trade payables after 72 days. Even with 43 days of inventory on the balance sheet, it has negative working capital that amounts to almost E5bn. The supplier demands Fiat to hold enough cash just so they don't get screwed when time goes bad. If Fiat ever needs to cut production, it will hemorrhage cash. Marchionne has seen many cycles and knows that at some point – possibly soon – conditions will get tougher.

 

While Brazil, APAC and Maserati are all going wrong – and Europe isn't contributing much either – FCA is fortunate to still have Chrysler as a profit engine. The move on Chrysler continues to look inspired and it is keeping the company afloat at present. Margins have surprised positively in 2015 and it is now making almost all of FCA's earnings. The problem here is that US dealer inventory as % of sales is at post-crisis high and ramping

 

http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/01/20160108_autoinv.jpg

 

I hate zerohedge with a passion but that's the most up-to-date I can find. It could be that everyone is prepping for a record selling season, but given Autonation's sizable miss and comments regarding new & used car margins & pricing, I think it's more like OEMs stuffing channels and building sizable over-capacity. The operating leverage of these auto OEMs is freaking massive, and when the cycle turns cash is going to bleed like a chicken getting its head chopped off.

 

Not trying to fear-monger, of course, US unemployment + claims + inflation trends all look really good to me. But we know the cycle has decidedly turned for many EM countries and a lot of industrial / resource chains. The US consumer / service is about the only bright spot everyone is clinging to (including myself). It might as well work and we see 18 mm SAAR, but boy gotta be careful with a company like this especially at this part of the cycle.

 

Of course, maybe Sergio could get a deal done. Unlike GM where you have muppets on the other hand super complacent with <10x PE (the ideal counterparty), Fiat is full of hedge funds and event folks who know they are playing with fire. Short squeeze can be pretty frequent and one can argue "risk-reward" does seem somewhat interesting -- makes shorting it very difficult. Personally not involved after getting out a few months after the relisting.

 

[merkhet]

I think the bearish posters above are dead wrong on this name, but I very much appreciate that they are willing to lay out their bearish views. It's helpful to be able to see the other side of the story since, as Picasso pointed out, the price goes down despite the good news. (Beating and hiking guidance.) Helps keep my optimism on the name in check.

 

That being said, this is what I find so enticing about the company:

[*]The company is beating guidance pretty handily thus far

[*]It looks like they'll be able to beat their guidance purely by not having sales deteriorate this year

[*]^ @ €70B in NAFTA sales (this year's rev) and 7.1% EBIT (last Q margin) they'll hit €5B EBIT

[*]^ I figure interest will come in around €1.6B & w/ 35% tax rate, they'll have €2.2B net income

[*]The interest charges are going down once the ring fence is off 1Q 2016 w/ some refinancing

[*]Their supplier contracts roll off 1Q 2016 so they get the benefit of the commodity tailwind

[*]The company is promising less than €5 billion of net industrial debt

[*]^ the convertible debt has a mandatory convert at end of 2016 which takes off €2.8B of net debt

[*]^ if the company sells Magneti Morelli for close to €3 billion, that will help as well

[*]^ if the company really is FCF positive this year, they might hit zero net debt this year

The last three parts are of incredible interest to me. I think Dazel hit it on the nose when he said that Marchionne is now on to Plan B. If their cap ex needs are now significantly lower, it would explain why Marchionne thinks he'll be in a net cash position in 2018. That may also mean that he might want to sell Magneti Morelli to essentially sponge out the dilution from the convertible. (It's what I would do.)

[Chalk bag]

I think the bearish posters above are dead wrong on this name, but I very much appreciate that they are willing to lay out their bearish views. It's helpful to be able to see the other side of the story since, as Picasso pointed out, the price goes down despite the good news. (Beating and hiking guidance.) Helps keep my optimism on the name in check.

 

That being said, this is what I find so enticing about the company:

[*]The company is beating guidance pretty handily thus far

[*]It looks like they'll be able to beat their guidance purely by not having sales deteriorate this year

[*]^ @ €70B in NAFTA sales (this year's rev) and 7.1% EBIT (last Q margin) they'll hit €5B EBIT

[*]^ I figure interest will come in around €1.6B & w/ 35% tax rate, they'll have €2.2B net income

[*]The interest charges are going down once the ring fence is off 1Q 2016 w/ some refinancing

[*]Their supplier contracts roll off 1Q 2016 so they get the benefit of the commodity tailwind

[*]The company is promising less than €5 billion of net industrial debt

[*]^ the convertible debt has a mandatory convert at end of 2016 which takes off €2.8B of net debt

[*]^ if the company sells Magneti Morelli for close to €3 billion, that will help as well

[*]^ if the company really is FCF positive this year, they might hit zero net debt this year

The last three parts are of incredible interest to me. I think Dazel hit it on the nose when he said that Marchionne is now on to Plan B. If their cap ex needs are now significantly lower, it would explain why Marchionne thinks he'll be in a net cash position in 2018. That may also mean that he might want to sell Magneti Morelli to essentially sponge out the dilution from the convertible. (It's what I would do.)

 

Merkhet - thanks for laying it out. It's a big self-help story like you said. If the macro & industry dynamics remain accommodating the name could be a big winner for sure. I'm more concerned about the industry supply discipline though -- looks to me more like 2004/05 which gets me worried. I guess that's what makes a market.

[merkhet]

No problem.

 

I wonder if the inventory to sales build up is a function of dealers stocking up to make sure they're not out of various models given the strong sales numbers. Also, I found the following chart from FRED that looks a bit different than the ZeroHedge chart.

 

http://research.stlouisfed.org/fred2/series/AISRSA

[racemize]

These numbers don't even match up. They have to be measuring something different?

[bonkers]

The way I see it, the key is being right about NAFTA demand and industry conduct (that's where the profits must remain). By necessity, this requires being roughly right about the cycle for the few coming years.

 

Peter Lynch wrote that the time to sell auto stocks was when the pent-up demand was all used up. The decline in 2008-2010 was so drastic, that my own belief is that there is still some left. I cannot prove this, and certainly all the full-time analysts should have better models than I can ever have (that is, if this is knowable at all).

 

However, if the theory about the scrapping cycle is true, the sales can remain stronger than most expect for at least 2 more years. After this article, even vehicle miles travelled turned up during 2015.

http://www.autonews.com/article/20140115/OEM09/140119757/pent-up-demand-just-starting-expect-17-million-sales-in-2015-says

 

What comes to demographics, most new cars are bought by the 55-65 age group (and almost 50 % of total new car buyers are 55+), which is bigger than ever in the U.S. In fact, there are +35 % of this aged people/men in the country than in 2007, so I think the peak car sales have a good chance of being higher than ever before (young people buy used cars, if any).

 

Few more timely positives, even if no guarantees:

-2015 Mar: Buffett bought Van Tuyl-dealership (apparently he does not believe car sales to collapse now)

-2015 Sep: (Apparently) Ted Weschler and Einhorn still upped their stakes in GM, I guess they thought it will not drop

-2015 Nov: NADA projected car sales to increase to 17.7 M cars (from 17.5 M in 2015A) in 2016

-2016 Jan: IHS, TrueCar and Kelley Blue Book say that sales of 18 M cars are possible in 2016, projecting 17.5-18 M cars (constant upgrades)

-2016 Jan: IHS estimates "there is still strong upside potential"...taking the US market to 18 million units over the next two years or so.

 

In history, before official recessions, car sales had already declined for more than a year in 1969, 1973, 1978-1979, (not 1981), 1989, 2000, and 2005-2007. Naturally, auto stocks had started heading lower already before that. But so far I can't say that car sales have started to decline. Jan is expected to be even weaker than normal due to blizzard, but FCA to grow and gain share, again.

http://www.prnewswire.com/news-releases/january-new-car-sales-impacted-by-historic-blizzard-down-3-percent-year-over-year-according-to-kelley-blue-book-300211275.html

 

As stated before, I also believe this demand to be surprisingly resilient to external shocks: Stock market crashes of 1987 and 2002 did not show after few months, Mexican peso crisis in 1994 did little...and especially the relatively large Asian credit/FX crisis of 1997 and Russian default+LTCM in 1998 did nothing to U.S. car sales. In fact sales grew to 2000 and Ford had its best margins in 1997-1999. Given, that was exuberant time. So I see a China risk for GM, Ford and VW, but not FCA, which has only to gain in APAC.

 

If there is as increase in inventories, it might be due to mix shift, also highlighted by FCA and AutoNation: sedans aren't selling enough, so they are piling up. At the same time there are multiple datapoints stating that Jeep and Ram are selling off dealer lots as quickly as ever.

 

But after 2017, my questions are 1) can the industry remain disciplined in pricing and incentives, and 2) cut production if they must. I'm not too optimistic. After this even Jeep will face weaker sales conditions, and this is where the negatives kick in. I think there is some risk from returned leasing cars (and low millenial buying) to create pricing pressure especially in the used car segment, and some of this may move over to new cars as well.

[muscleman]

Does anyone know why FCAU is keeping 30 bn debt and 20 bn cash? That's a very inefficient balance sheet.

If the high cash balance is needed for rainy days, is it possible to pay down most of the debt with cash and get a 20 bn line of credit?

[merkhet]

Does anyone know why FCAU is keeping 30 bn debt and 20 bn cash? That's a very inefficient balance sheet.

If the high cash balance is needed for rainy days, is it possible to pay down most of the debt with cash and get a 20 bn line of credit?

 

When you most need the cash, it's possible that the line of credit gets pulled. So there are reasons to keep cash lying around.

[goldfinger]

Does anyone know why FCAU is keeping 30 bn debt and 20 bn cash? That's a very inefficient balance sheet.

If the high cash balance is needed for rainy days, is it possible to pay down most of the debt with cash and get a 20 bn line of credit?

 

When you most need the cash, it's possible that the line of credit gets pulled. So there are reasons to keep cash lying around.

Marchionne stated very recently (I think earnings report with analysts that he will eventually potentially decrease debt along with cash)

[merkhet]

Does anyone know why FCAU is keeping 30 bn debt and 20 bn cash? That's a very inefficient balance sheet.

If the high cash balance is needed for rainy days, is it possible to pay down most of the debt with cash and get a 20 bn line of credit?

 

When you most need the cash, it's possible that the line of credit gets pulled. So there are reasons to keep cash lying around.

Marchionne stated very recently (I think earnings report with analysts that he will eventually potentially decrease debt along with cash)

 

Just to be clear, I think it's a good idea to pay down some of the more expensive debt with cash. However, I don't think they could just pay it all off and rely on a line of credit during a tough downturn...

[goldfinger]

Does anyone know why FCAU is keeping 30 bn debt and 20 bn cash? That's a very inefficient balance sheet.

If the high cash balance is needed for rainy days, is it possible to pay down most of the debt with cash and get a 20 bn line of credit?

 

When you most need the cash, it's possible that the line of credit gets pulled. So there are reasons to keep cash lying around.

Marchionne stated very recently (I think earnings report with analysts that he will eventually potentially decrease debt along with cash)

 

Just to be clear, I think it's a good idea to pay down some of the more expensive debt with cash. However, I don't think they could just pay it all off and rely on a line of credit during a tough downturn...

Sure, I interpreted it like that too...

At the end he is going to make look like an easy target for a merger...

 

[Phaceliacapital]

They are waiting to pay down the most expensive, ring fenced Chrysler debt.