Author Topic: FCAU - Fiat Chrysler Automobiles  (Read 778480 times)

Sportgamma

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Re: FIATY - Fiat S.p.A.
« Reply #10 on: November 10, 2012, 03:10:24 PM »
From the 3q report of Third Avenue:

Quote
To put it somewhat bluntly, if shareholders must
pay the insiders of holding companies (through their
operating costs), the pay should at least be justified by valueadded
contributions made by those insiders.
Making matters worse, inertia or inaction can take a toll on
shareholder returns that greatly exceeds operating costs. To
illustrate an example of this, we point to a tale of two
European automobile manufacturers, French Peugeot S.A.
(“Peugeot”) and Italian Fiat S.p.A. (“Fiat”). Peugeot and
Fiat share many similarities: both companies are controlled
by holding companies (note: neither of which are held in
the Fund), operate in a very difficult industry that faces
formidable headwinds in the continental European mass
market, have relatively weak competitive positions outside
of Europe, and had generally been long-time beneficiaries
of strong local banking relationships and supportive local
governments. Not surprisingly, the global financial crisis hit
each of these companies particularly hard and exposed them
as not competitive enough on a global scale.
In the depths of the financial crisis, Peugeot’s holding
company remained passive, to our knowledge taking few (if
any) truly aggressive actions to confront its challenges. On
the other hand, Fiat’s holding company, Exor S.p.A.
(“Exor”) has been far more aggressive. Sergio Marchionne,
hired by Exor to be the CEO of Fiat, structured the
acquisition of Chrysler in what we see as a very clever and
opportunistic deal designed to address Fiat’s exposure to the
long-term problems facing the European auto market. In
addition, Exor also oversaw the 2011 de-merger of truck
and agricultural equipment maker Fiat Industrial S.p.A.
from Fiat (Auto), and eliminated the multiple share class
structure at each. Cost cutting at Fiat has been impressive,
helping the carmaker (even excluding Chrysler) remain
modestly profitable in the current environment, while
Peugeot is suffering substantial losses.
The resulting difference in stock price performance has been
astounding; from March 31, 2009 through July 31, 2012,
Fiat common stock generated a total return for shareholders
of over 80%, while Peugeot produced a negative total
shareholder return of -47%2. We provide this example as an
illustration of how important proactive versus passive
management tends to be to the performance of holding
companies and their subsidiaries. Shareholders of Peugeot’s
holding company have suffered as a result of its inactivity
amid crisis, while shareholders of Fiat’s holding company
have benefitted from their bold actions.

Of course, taking bold actions can be as harmful to
shareholder returns as they have been helpful in the case of
Fiat; a controlling shareholder that takes aggressive, but
foolish, action could do much more harm than a passive
controlling shareholder. To that point, another of the softer
factors to be weighed in assessing the investment
attractiveness of a holding company is the nature of its
investment activity, principally the quality of the purchase
and sale decisions made by management. Considerable
wealth for shareholders can be, and is, created by shrewd
resource conversion activities.

On page 30:
http://www.thirdave.com/ta/documents/sl/TAF%203Q%202012%20Report%20and%20Shareholder%20Letters.pdf


PlanMaestro

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Re: FIATY - Fiat S.p.A.
« Reply #11 on: November 10, 2012, 05:44:50 PM »
Marchionne is impressive. I have been hearing his conference calls and interviews, and is truly smart and opportunistic. After reading "Once upon a car" and the way he jumped into the Chrysler restructuring… and became the government's only option… the Jamie Dimon of the car industry.

http://www.cbsnews.com/video/watch/?id=7403188n

Fiat however faces headwinds and Marchionni needs some lucky breaks to stabilize the turnaround.

https://twitter.com/PlanMaestro/status/263371053739417601
« Last Edit: June 07, 2013, 06:02:29 PM by PlanMaestro »

Sportgamma

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Re: FIATY - Fiat S.p.A.
« Reply #12 on: November 15, 2012, 04:15:12 AM »
The exor/fiat chairman, John Elkann is an interesting figure:

Special Report: At Italy's Fiat, young scion steers tough course
Quote
He was born in New York in 1976 to Margherita Agnelli, daughter of family patriarch Gianni, and Alain Elkann, a journalist from a prominent French Jewish family. His parents split when he was five and his mother remarried and started a new family. By the time Elkann was 14 he had five new siblings, in addition to the two from his mother's first marriage.

Elkann lived in Britain and Brazil before attending high school in Paris. (He speaks four languages.) His limited boyhood experience of Turin was summer visits to his grandparents, who lived in a hilltop villa. In 1994 he enrolled in Turin Polytechnic, eschewing his grandparents' elegant home to live in a dormitory room with a shower but no private toilet.

"It was a good sign of accepting an almost military attitude of effort," says a former Fiat manager, who asked not to be named. "He showed he could adapt."

Two years later Elkann went to the British Midlands to work at a Fiat-owned headlight plant, staying with an English couple who had no idea their lodger was an Agnelli heir. Elkann usually ate dinner from a tray in front of the television, sitting next to the family dog.

In December 1997 Elkann's cousin, Giovanni Alberto Agnelli, who was being groomed to run Fiat, died of cancer. Elkann was named in his stead to Fiat's board and designated, at age 22, as heir to the controlling stake. Other company-family traumas followed. In 2002 Fiat nearly went bust. In 2003 Gianni Agnelli died, followed by Elkann's great-uncle Umberto Agnelli in 2004.
http://www.reuters.com/article/2012/11/09/us-fiat-elkann-idUSBRE8A80BB20121109

Unlikely heir who saved the family jewels
Quote
However, drawing from the lesson of his Birmingham experience, he has not kicked back and done nothing, as many analysts thought he might. Mr Elkann brought in Sergio Marchionne, Fiat’s thrusting chief executive, and gave his blessing to dilute the Agnelli family stake in order to pave the way for the company’s takeover of 20 per cent of Chrysler in 2009, and a later demerger of the group. These deals were unthinkable for previous generations and even other European carmaking families, such as the Peugeots and the Quandts behind BMW.

The Agnelli family has reaped the rewards in the subsequent share price rise. And, in recent days, Mr Elkann has taken full control of the family investment company, a firm with €9bn ($12.6bn) in net asset value and more than €1bn of investment firepower, with the intention of making it into a kind of Berkshire Hathaway for the capital goods industry. He wants to expand into the US and Asia.
http://www.ft.com/cms/s/0/0693507a-4830-11e0-b323-00144feab49a.html#ixzz2CI8BGM9C

Interview with Gianluigi Gabetti
Quote
But Agnelli believed in the dynasty…

GG: He definitely wanted one of his descendents to lead Fiat. And that is what happened. After the death of Giovanni Alberto Agnelli, he chose John Elkann as his successor and personally prepared him for the job.

He kept him near at home, and introduced him to me and I, in turn, observed that the young man showed a strong interest and had the ability to work hard.

We were together for a few years, until I thought the time was ripe to restore to the family the responsibility that I had received, and I retired with a clear conscience.

Does John Elkann believe in a Fiat controlled by the family?

GG: There is a strong desire of continuity and the family is closer than ever.

What about Marchionne, with his edgy style that angers the labor unions, the politicians and now even Volksawagen?

Umberto Agnelli wanted him on the Board of Directors of Fiat, John Elkann and I chose him to take the place of Giuseppe Morchio, who did not want to be limited to the role of managing director.

We have become fast friends, Sergio and I, we spend hours together and I have discovered his genial side. I can only hope that, with John, they will achieve complete success.
http://www.thisisitaly-panorama.com/top-stories/interview-with-gianluigi-gabetti/

John Elkann keynote speech at the 21st summit of the Family Business Network
http://www.youtube.com/watch?v=UIOTfJO2low&feature=relmfu

All In The Family
http://www.time.com/time/magazine/article/0,9171,1207766-1,00.html



PlanMaestro

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Re: FIATY - Fiat S.p.A.
« Reply #14 on: December 10, 2012, 05:48:02 PM »
http://www.fiatspa.com/it-IT/investor_relations/investors/risultati_trimestrali/FiatDocuments/2012/Q3_2012_Results.pdf

Chrysler Group and Fiat continue to separately manage their own financial matters, including treasury services

 No guarantee, support or similar obligations in relation to other’s financing obligations; no obligation or commitment to provide funding to the other

 Financial segregation also supported by legally binding obligations

 Chrysler’s May 2011 credit agreement limits financial support to Fiat (inter alia cumulative limit on dividend payments of $500mn payable only if specified minimum liquidity is met)

 Fiat’s 3-year RCF also limits financial support to Chrysler (including limits on guarantees and loans)

 Chrysler’s financing agreements and its LLC Operating Agreement contain additional restrictions limiting related party transactions, including approval process for material commercial or financial transactions between the companies

These restrictions apply, while these instruments are in place, regardless of the percentage of Fiat’s ownership in Chrysler

PlanMaestro

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Re: FIATY - Fiat S.p.A.
« Reply #15 on: December 12, 2012, 02:45:42 PM »
From a 2005 VIC write-up, pre-spinoff of the Industrial division.

Why believe in Marchionne’s targets?  Marchionne’s track-record has gone somewhat unnoticed by many US investors, as well as European sell-side auto analysts who cover the company, as his past leadership experience has been largely Swiss-based and has ranged widely in sector from aluminum to industrial services to chemicals. Marchionne has successfully taken two companies, Alusuisse and SGS SA from the depths of seemingly inexorable problems, to highly profitable, best-in-class performers.

At Alusuisse, Marchionne brought a cash burning aluminum maker with negative operating margins to a 12% margin over 3 years, (exceeding the aggressive targets he had set for himself), split off its chemicals subsidiary (Lonza), and then sold Alusuisse to Alcan at a premium. 

At SGS, Sergio inherited an industrial testing company with 5.9% EBIT margins and a host of legacy credibility issues.  In less than 2 years, Sergio took margins to 12%, best-in-class, before leaving to join Fiat.  Both stocks tripled under Marchionne’s leadership.

Sergio is not new to analyst skepticism. Not one analyst believes Marchionne will make the targets laid out for 2007, just as no one believed his targets at SGS or Alusuisse. Sergio prefers to achieve his goals and then comment, which seems to leave the analyst community somewhat dumbfounded and skeptical. It may or may not be relevant to readers to see the evolution of analyst skepticism in historical turnarounds, but I have included a timeline of key events in the turnaround at SGS, analyst reaction and share price developments (included at the end).



PlanMaestro

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Re: FIATY - Fiat S.p.A.
« Reply #16 on: December 12, 2012, 03:09:02 PM »
A bit of 2006 history. Still in awe that Ford and Fiat not just survived but prospered from the crisis.

Fiat: Italian giant still midway through multi-point turn
By Adrian Michaels
Published: September 27 2006 16:56
http://www.ft.com/cms/s/1/d579d5b6-4e3a-11db-bcbc-0000779e2340.html#ixzz2EsiDqoc0

Step one for Sergio Marchionne when he arrived as chief executive at Fiat in June 2004 was hiring and firing. Never has the Italian phrase “cleaning the piazza”, which denotes starting afresh in a seemingly ominous manner, been more appropriate.

Mr Marchionne even filled some posts more than once. He obviously was not happy with the appointment he had made in January 2005 of Karl-Heinz Kalbfell to the top of Alfa Romeo, part of the Fiat stable. The following September, Mr Kalbfell was moved on to run Maserati, also part of the group. This month Mr Kalbfell left Fiat completely.

“This was an incredibly hierarchical command and control leadership structure,” Mr Marchionne told the FT this year. “I spent a lot of time searching for people who were not just younger in age but were untouched by that [culture] and were ready to engage.”

Mr Marchionne moved fast out of necessity. Fiat was in financial peril and leaking €1bn in cash a year. Market share, even in Italy, was moving towards record lows. Not that long ago the company was sexy, an epitome of European cool. But it lost that reputation amid the production of dull cars.

Mr Marchionne had pressing balance sheet issues to fix along with the changes in personnel. A relationship with General Motors had gone sour and the two were arguing over an agreement that could have seen the US company forced to acquire the lossmaking Fiat Auto. That was resolved in Fiat’s favour early in 2005. GM paid Fiat €1.55bn to be able to walk away.

Fiat also cut its debt when it enforced a deal with bank lenders to exchange €3bn of debt for shares in the company. Three Italian banks still own 14 per cent.

The GM agreement had a crucial effect beyond the balance sheet. Mr Marchionne has seized the chance to forge partnerships with a number of other manufacturers.The alliances involve the sharing of the risks and costs of development of new models. They go some way towards answering criticism that Fiat can no longer survive on its own and must merge with a rival.

Fiat will be sharing a platform with Ford to develop a new “Cinquecento”, the iconic miniature Fiat of 40 years ago beloved of film buffs. Ford will develop a new generation of its Ka.

Fiat has also expanded its alliance with Peugeot of France, forged deals with India’s Tata, and with Suzuki and Severstal. Iveco. Fiat’s truckmaker, has just agreed a joint venture with SAIC in China.

And, finally, it has a major success on its hands. The company’s launch of its new Punto small car has been a hit, helping Fiat Auto record a small trading profit for the fourth quarter of 2005 after more than four years of quarterly losses.

Mr Marchionne has been methodically dealing with the issues one at a time. After Fiat’s own models had been addressed, he starting to talk aloud about a crisis at Alfa Romeo, where he saw a car marque aiming unsuccessfully to compete both against large BMWs and small Volkswagens. [RR: entering the USA in 2013]

Then he started to shake up CNH, the company’s agricultural and construction machinery arm. CNH has been profitable but its performance has lagged behind competitors. [RR: was spinned-off Fiat Industrial]

Lancia, the long-neglected marque that is also in the Fiat stable, came next. Lancia, among other things, is to be relaunched in the UK in 2008.

Investors are relatively happy about Fiat’s prospects, considering that between 2001 and 2004 the company lost almost €8bn. Fiat shares have leapt in the past year, and this month hit a four-year high.

But all that does not mean survival is guaranteed. The company has to show that it can follow the success of the Punto with more hit models. It is soon to replace its staid Stilo car. The new Cinquecento could be crucial.

And analysts are divided on whether the strategy of sharing production and development costs will help Fiat stay on its own in the long run. Philippe Houchois, analyst at JP Morgan, says: “Peugeot has been optimising its cost base and has still run into trouble.

“I think Fiat should take advantage of its current strength to sell its car business or move into a joint venture where it does not have control.”

That for now may be beyond Fiat’s thinking, but it is something for a new boss at Fiat Auto to ponder when appointed. Mr Marchionne is for now chief executive both of the group and Fiat Auto but is expected to step back from the car division soon.

Meanwhile the company would like to regain its investment grade status, last seen in 2002. Its May €1bn bond issue was almost priced as investment grade, analysts say, and a boost to its rating would significantly strengthen the company.

PlanMaestro

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Re: FIATY - Fiat S.p.A.
« Reply #17 on: December 13, 2012, 10:30:02 AM »
Good long interview with Marchionne.
http://www.youtube.com/watch?v=Q39ZywbcfN8




PlanMaestro

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Re: FIATY - Fiat S.p.A.
« Reply #19 on: December 13, 2012, 06:54:05 PM »
Chrysler named 2012 Marketer of the Year by Advertising Age
http://www.autonews.com/article/20121126/RETAIL03/121129930#ixzz2EzVE23wo