Author Topic: FCAU - Fiat Chrysler Automobiles  (Read 834103 times)

Sportgamma

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Re: FCAU - Fiat Chrysler Automobiles
« Reply #2780 on: October 11, 2018, 11:26:12 AM »
That is a good way, but not a great way, to look at the downside. The real downside is that the company is burning cash through expenses like R&D and not get rewarded for it.
Not that i think it will happen, I’m long on the stock, but the liquidation scenario is obv not likely and not the worst case scenario.
But well calculated and interesting thought.

Snorky

I'm not sure that is the downside really. A scenario where they would ramp up CapEx at low or negative returns would be much more destructive. Or a significant drop in Jeep sales.

Edit: I meant to reply to the comment that Snorky was replying to, saying basically the same thing that Snorky is saying...
« Last Edit: October 12, 2018, 04:27:47 AM by Sportgamma »


Homestead31

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Re: FCAU - Fiat Chrysler Automobiles
« Reply #2781 on: October 12, 2018, 12:46:56 PM »
what happens if they start filing 10Ks in the US instead of 20Fs?

this may have gotten lost in the sauce, so i am re-posting it.

i think this is one of the most important things that no one is talking about.

has anyone thought of what would happen if they simply decided to file 10Ks rather than 20Fs?

Shooter MacGavin

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Re: FCAU - Fiat Chrysler Automobiles
« Reply #2782 on: October 12, 2018, 01:08:08 PM »
what happens if they start filing 10Ks in the US instead of 20Fs?

this may have gotten lost in the sauce, so i am re-posting it.

i think this is one of the most important things that no one is talking about.

has anyone thought of what would happen if they simply decided to file 10Ks rather than 20Fs?

why is this the most important thing? why would  they decide to file 10ks? They're a NV based company right? Have they talked about this?  Is there an economic impact you are alluding to or just some kind of IFRS /GAAP thing?

Spekulatius

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Re: FCAU - Fiat Chrysler Automobiles
« Reply #2783 on: October 12, 2018, 03:42:13 PM »
what happens if they start filing 10Ks in the US instead of 20Fs?

this may have gotten lost in the sauce, so i am re-posting it.

i think this is one of the most important things that no one is talking about.

has anyone thought of what would happen if they simply decided to file 10Ks rather than 20Fs?

why is this the most important thing? why would  they decide to file 10ks? They're a NV based company right? Have they talked about this?  Is there an economic impact you are alluding to or just some kind of IFRS /GAAP thing?

I donít see how it matters whether itís they publish a 10-K or 20F. The bigger question is what are they going to do with the cash from the Magneti sale? I am guessing they have to pay some taxes on this and also the EBIT will be lower by $500 M Ä going forward.
To be a realist, one has to believe in miracles.

DTEJD1997

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Re: FCAU - Fiat Chrysler Automobiles
« Reply #2784 on: October 12, 2018, 11:46:55 PM »

Hypothetically, if they decided to never spend another dollar on R&D or capex, how long do you think they could keep selling the existing lineup before sales dry up?  Let's call it 3yrs.  That would produce ~Ä45B in cash flow.  Add back the Ä4B year-end 2018 net cash, deduct Ä10B for negative working capital unwind and Ä9B for underfunded pension, that leaves us with Ä30B in cash to distribute to shareholders on a Mkt Cap of Ä22-23B after MM sale.  Obviously I don't expect them to liquidate the company, but that seems like a pretty decent margin of safety to me.

If the company suddenly decided to cut back on R&D & any non-essential capital spending, kind of like what happened with British car manufacturers in the 70's & early 80's. I would imagine it would look something like that.

Year 1, full sales & profitability....Year 2 a bit less, Year 3 even less, and every year thereafter it would decline further.  I think the Jaguar XJS was produced with very minor changes for 21 years. 

FCAU might be able to do that with the Jeep brand?

I think they would get a TREMENDOUS amount of cash flow...with most of it coming in years 1-5, almost certainly more than the current EV of the company.

As for the WORST CASE situation for FCAU....maybe a HUGE economic downturn in USA and the world...sales collapse and the company becomes unprofitable.

Management then thinks they need to "bet the company" on new models, or possibly "new technology" of electric and/or self driving cars.  They spend all their cash AND they borrow a TON of money.  The new efforts & models don't pan out and they go bankrupt again.  This time, they get liquidated.

I don't think the worst case will happen.

Hopefully the company largely keeps on the path they have been going on.  Disciplined & intelligent capital allocation!

whatdadil9

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Re: FCAU - Fiat Chrysler Automobiles
« Reply #2785 on: October 13, 2018, 06:58:23 AM »
Based in netherlands. no taxes on sale.

Filing US GAAP will allow FCA to be owned by indices. Why cant us based funds onw this instead of F and GM.. US GAAP and index ownership.

ALSO gets us away from all the italian index selling.

Spekulatius

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Re: FCAU - Fiat Chrysler Automobiles
« Reply #2786 on: October 13, 2018, 07:53:46 AM »
The self liquidation exercise is just enough exercise in math, the reality is different. If a management team would do this, all the stakeholders (employee, suppliers, customers, dealers etc) would start to bail and the cash flows would crater much quicker than you would think. Plus politicians would step on and management would be on the hot seat very quickly.
To be a realist, one has to believe in miracles.

Homestead31

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Re: FCAU - Fiat Chrysler Automobiles
« Reply #2787 on: Today at 05:57:07 AM »

[/quote]

I donít see how it matters whether itís they publish a 10-K or 20F.
[/quote]

economically it does not matter.  but, structurally it does.  if tomorrow they decided to file 10Ks, then they would be eligible for US index inclusion, and there would be a wave of forced buying that would push the price up.  It is impossible to know what the long term plan is here, but if John Elkann is considering an eventual sale - which is certainly possible - it seems likely that they would choose to file 10Ks first in order to drive the price up so a buyer would have to anchor higher.  Additionally, as Jeep and Ram continue to be emphasized, and the Fiat brand continues to be de-emphasized, it makes more and more sense to consider filing 10Ks. 

Impossible to put a value on what this dynamic is worth, but I am happy to have this free option in management's tool kit.