Author Topic: FCAU - Fiat Chrysler Automobiles  (Read 857787 times)

QuesnelCap

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Re: FCAU - Fiat Chrysler Automobiles
« Reply #2840 on: November 08, 2018, 07:53:44 AM »
ADW Capital Letter to Fiat Chrysler Board. Adam Wyden has been known for taking activist position at much smaller companies, most recently Par Technology. Going for a whale here. His tone is friendly so far but interesting to see how it plays out.

https://www.prnewswire.com/news-releases/adw-capital-issues-letter-to-board-to-pursue-value-creation-strategies-300746687.html


Foreign Tuffett

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Re: FCAU - Fiat Chrysler Automobiles
« Reply #2841 on: November 08, 2018, 12:28:45 PM »
ADW Capital Letter to Fiat Chrysler Board. Adam Wyden has been known for taking activist position at much smaller companies, most recently Par Technology. Going for a whale here. His tone is friendly so far but interesting to see how it plays out.

https://www.prnewswire.com/news-releases/adw-capital-issues-letter-to-board-to-pursue-value-creation-strategies-300746687.html

IMO the chart needs to adjust for FCAU's lack of an in-house financing division to be truly apples-to-apples. The #s look quite different if (for example) you separate out Ford Credit from F's automotive EBIT.

Parsad

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Re: FCAU - Fiat Chrysler Automobiles
« Reply #2842 on: November 08, 2018, 05:09:46 PM »
ADW Capital Letter to Fiat Chrysler Board. Adam Wyden has been known for taking activist position at much smaller companies, most recently Par Technology. Going for a whale here. His tone is friendly so far but interesting to see how it plays out.

https://www.prnewswire.com/news-releases/adw-capital-issues-letter-to-board-to-pursue-value-creation-strategies-300746687.html

IMO the chart needs to adjust for FCAU's lack of an in-house financing division to be truly apples-to-apples. The #s look quite different if (for example) you separate out Ford Credit from F's automotive EBIT.

If you did that, the numbers would look even worse for Ford and GM automotive.  The finance business is a cash cow, and it would not be difficult for FCAU to add that component with their strong balance sheet and cash flow.  I agree with virtually every aspect of ADW's letter...especially the low hanging fruit of just filing in US GAAP.  Cheers!
No man is a failure who has friends!

Foreign Tuffett

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Re: FCAU - Fiat Chrysler Automobiles
« Reply #2843 on: November 09, 2018, 06:48:53 AM »
ADW Capital Letter to Fiat Chrysler Board. Adam Wyden has been known for taking activist position at much smaller companies, most recently Par Technology. Going for a whale here. His tone is friendly so far but interesting to see how it plays out.

https://www.prnewswire.com/news-releases/adw-capital-issues-letter-to-board-to-pursue-value-creation-strategies-300746687.html

IMO the chart needs to adjust for FCAU's lack of an in-house financing division to be truly apples-to-apples. The #s look quite different if (for example) you separate out Ford Credit from F's automotive EBIT.

If you did that, the numbers would look even worse for Ford and GM automotive.  The finance business is a cash cow, and it would not be difficult for FCAU to add that component with their strong balance sheet and cash flow.  I agree with virtually every aspect of ADW's letter...especially the low hanging fruit of just filing in US GAAP.  Cheers!

I'm not sure how you can simultaneously hold both these positions:
(1) automaker in-house financing is a "cash cow"
and
(2) FCAU's lack of a significant in-house financing division somehow advantages its valuation relative to F and GM


If (for the sake of argument) one valued Ford Credit @ 1X tangible book value, the chart presented in ADW's letter would look quite different.

NBL0303

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Re: FCAU - Fiat Chrysler Automobiles
« Reply #2844 on: November 09, 2018, 08:07:35 AM »
ADW Capital Letter to Fiat Chrysler Board. Adam Wyden has been known for taking activist position at much smaller companies, most recently Par Technology. Going for a whale here. His tone is friendly so far but interesting to see how it plays out.

https://www.prnewswire.com/news-releases/adw-capital-issues-letter-to-board-to-pursue-value-creation-strategies-300746687.html

IMO the chart needs to adjust for FCAU's lack of an in-house financing division to be truly apples-to-apples. The #s look quite different if (for example) you separate out Ford Credit from F's automotive EBIT.

If you did that, the numbers would look even worse for Ford and GM automotive.  The finance business is a cash cow, and it would not be difficult for FCAU to add that component with their strong balance sheet and cash flow.  I agree with virtually every aspect of ADW's letter...especially the low hanging fruit of just filing in US GAAP.  Cheers!

I'm not sure how you can simultaneously hold both these positions:
(1) automaker in-house financing is a "cash cow"
and
(2) FCAU's lack of a significant in-house financing division somehow advantages its valuation relative to F and GM


If (for the sake of argument) one valued Ford Credit @ 1X tangible book value, the chart presented in ADW's letter would look quite different.

It is about adjusting to get a better look-through of the financial comparisons of the respective companies auto operations.

Foreign Tuffett

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Re: FCAU - Fiat Chrysler Automobiles
« Reply #2845 on: November 09, 2018, 08:12:26 AM »
ADW Capital Letter to Fiat Chrysler Board. Adam Wyden has been known for taking activist position at much smaller companies, most recently Par Technology. Going for a whale here. His tone is friendly so far but interesting to see how it plays out.

https://www.prnewswire.com/news-releases/adw-capital-issues-letter-to-board-to-pursue-value-creation-strategies-300746687.html

IMO the chart needs to adjust for FCAU's lack of an in-house financing division to be truly apples-to-apples. The #s look quite different if (for example) you separate out Ford Credit from F's automotive EBIT.

If you did that, the numbers would look even worse for Ford and GM automotive.  The finance business is a cash cow, and it would not be difficult for FCAU to add that component with their strong balance sheet and cash flow.  I agree with virtually every aspect of ADW's letter...especially the low hanging fruit of just filing in US GAAP.  Cheers!

I'm not sure how you can simultaneously hold both these positions:
(1) automaker in-house financing is a "cash cow"
and
(2) FCAU's lack of a significant in-house financing division somehow advantages its valuation relative to F and GM


If (for the sake of argument) one valued Ford Credit @ 1X tangible book value, the chart presented in ADW's letter would look quite different.

It is about adjusting to get a better look-through of the financial comparisons of the respective companies auto operations.

Yes, that's exactly the point I'm trying to make.

Parsad

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Re: FCAU - Fiat Chrysler Automobiles
« Reply #2846 on: November 09, 2018, 05:37:12 PM »
ADW Capital Letter to Fiat Chrysler Board. Adam Wyden has been known for taking activist position at much smaller companies, most recently Par Technology. Going for a whale here. His tone is friendly so far but interesting to see how it plays out.

https://www.prnewswire.com/news-releases/adw-capital-issues-letter-to-board-to-pursue-value-creation-strategies-300746687.html

IMO the chart needs to adjust for FCAU's lack of an in-house financing division to be truly apples-to-apples. The #s look quite different if (for example) you separate out Ford Credit from F's automotive EBIT.

If you did that, the numbers would look even worse for Ford and GM automotive.  The finance business is a cash cow, and it would not be difficult for FCAU to add that component with their strong balance sheet and cash flow.  I agree with virtually every aspect of ADW's letter...especially the low hanging fruit of just filing in US GAAP.  Cheers!

I'm not sure how you can simultaneously hold both these positions:
(1) automaker in-house financing is a "cash cow"
and
(2) FCAU's lack of a significant in-house financing division somehow advantages its valuation relative to F and GM


If (for the sake of argument) one valued Ford Credit @ 1X tangible book value, the chart presented in ADW's letter would look quite different.

It is about adjusting to get a better look-through of the financial comparisons of the respective companies auto operations.

Yes, that's exactly the point I'm trying to make.

The presentation by ADW compares the valuation of FCAU versus the automotive and finance businesses of F & GM.  Adding in-house financing to FCAU would only make FCAU look even cheaper than already presented.  ADW's point is that FCAU is cheaper than it's competitors already.  Cheers!
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Foreign Tuffett

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Re: FCAU - Fiat Chrysler Automobiles
« Reply #2847 on: November 10, 2018, 11:42:41 AM »
ADW Capital Letter to Fiat Chrysler Board. Adam Wyden has been known for taking activist position at much smaller companies, most recently Par Technology. Going for a whale here. His tone is friendly so far but interesting to see how it plays out.

https://www.prnewswire.com/news-releases/adw-capital-issues-letter-to-board-to-pursue-value-creation-strategies-300746687.html

IMO the chart needs to adjust for FCAU's lack of an in-house financing division to be truly apples-to-apples. The #s look quite different if (for example) you separate out Ford Credit from F's automotive EBIT.

If you did that, the numbers would look even worse for Ford and GM automotive.  The finance business is a cash cow, and it would not be difficult for FCAU to add that component with their strong balance sheet and cash flow.  I agree with virtually every aspect of ADW's letter...especially the low hanging fruit of just filing in US GAAP.  Cheers!

I'm not sure how you can simultaneously hold both these positions:
(1) automaker in-house financing is a "cash cow"
and
(2) FCAU's lack of a significant in-house financing division somehow advantages its valuation relative to F and GM


If (for the sake of argument) one valued Ford Credit @ 1X tangible book value, the chart presented in ADW's letter would look quite different.

It is about adjusting to get a better look-through of the financial comparisons of the respective companies auto operations.

Yes, that's exactly the point I'm trying to make.

(1) The presentation by ADW compares the valuation of FCAU versus the automotive and finance businesses of F & GM. (2) Adding in-house financing to FCAU would only make FCAU look even cheaper than already presented.  ADW's point is that FCAU is cheaper than it's competitors already.  Cheers!

We're still talking past each other. I have divided your comment into two parts:

1) Yes, the chart in the letter lumps Ford and GM's auto EBIT and financing EBIT together. My point is that I don't think it's appropriate to do so. Instead, as financials, the in-house financing companies should probably be valued at some multiple of tangible book value. I already threw 1X TBV out as a valuation for Ford Credit.

2) It takes lots of hard work and capital to build or buy a financing org of this scale. Way back in 2010 GM paid $3.5B to acquire its way back into this line of business. If it were easy FCAU would already have done it.

Parsad

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Re: FCAU - Fiat Chrysler Automobiles
« Reply #2848 on: November 10, 2018, 05:17:36 PM »
ADW Capital Letter to Fiat Chrysler Board. Adam Wyden has been known for taking activist position at much smaller companies, most recently Par Technology. Going for a whale here. His tone is friendly so far but interesting to see how it plays out.

https://www.prnewswire.com/news-releases/adw-capital-issues-letter-to-board-to-pursue-value-creation-strategies-300746687.html

IMO the chart needs to adjust for FCAU's lack of an in-house financing division to be truly apples-to-apples. The #s look quite different if (for example) you separate out Ford Credit from F's automotive EBIT.

If you did that, the numbers would look even worse for Ford and GM automotive.  The finance business is a cash cow, and it would not be difficult for FCAU to add that component with their strong balance sheet and cash flow.  I agree with virtually every aspect of ADW's letter...especially the low hanging fruit of just filing in US GAAP.  Cheers!

I'm not sure how you can simultaneously hold both these positions:
(1) automaker in-house financing is a "cash cow"
and
(2) FCAU's lack of a significant in-house financing division somehow advantages its valuation relative to F and GM


If (for the sake of argument) one valued Ford Credit @ 1X tangible book value, the chart presented in ADW's letter would look quite different.

It is about adjusting to get a better look-through of the financial comparisons of the respective companies auto operations.

Yes, that's exactly the point I'm trying to make.

(1) The presentation by ADW compares the valuation of FCAU versus the automotive and finance businesses of F & GM. (2) Adding in-house financing to FCAU would only make FCAU look even cheaper than already presented.  ADW's point is that FCAU is cheaper than it's competitors already.  Cheers!

We're still talking past each other. I have divided your comment into two parts:

1) Yes, the chart in the letter lumps Ford and GM's auto EBIT and financing EBIT together. My point is that I don't think it's appropriate to do so. Instead, as financials, the in-house financing companies should probably be valued at some multiple of tangible book value. I already threw 1X TBV out as a valuation for Ford Credit.

2) It takes lots of hard work and capital to build or buy a financing org of this scale. Way back in 2010 GM paid $3.5B to acquire its way back into this line of business. If it were easy FCAU would already have done it.

1)  You could take the financing business for GM and F out, but then they would look even more expensive than FCAU than they are by including them.  In other words, FCAU's auto business is more profitable and efficient than GM or F's auto business.  The mispricing of FCAU becomes even more egregious!

2)  Adding a finance business is actually not that difficult if you have a captive audience through in-house sales.  It would be simply extending financing to existing retail and commercial customers.  The reason FCAU has not done it yet is because they were deleveraging and trying to get the automotive business fairly valued...both by markets and credit markets.  Now that the heavy lifting is done, the auto business simplified, and credit quality expected to increase, they would have a lower cost finance business than if they had launched years ago.  You have to be competitive in the finance business, and if your credit offerings are not comparable to the best competitors, buyers will find financing elsewhere and you'll be stuck with lesser quality borrowers that completely skew your expected loss ratios.

Cheers!
No man is a failure who has friends!

LC

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Re: FCAU - Fiat Chrysler Automobiles
« Reply #2849 on: November 10, 2018, 08:14:34 PM »
Quote
2)  Adding a finance business is actually not that difficult if you have a captive audience through in-house sales.  It would be simply extending financing to existing retail and commercial customers.  The reason FCAU has not done it yet is because they were deleveraging and trying to get the automotive business fairly valued...both by markets and credit markets.  Now that the heavy lifting is done, the auto business simplified, and credit quality expected to increase, they would have a lower cost finance business than if they had launched years ago.  You have to be competitive in the finance business, and if your credit offerings are not comparable to the best competitors, buyers will find financing elsewhere and you'll be stuck with lesser quality borrowers that completely skew your expected loss ratios.
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