Author Topic: FCAU - Fiat Chrysler Automobiles  (Read 660146 times)

racemize

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 2483
Re: FCAU - Fiat Chrysler Automobiles
« Reply #2560 on: September 15, 2017, 06:48:45 PM »
I've owned GM since the bankruptcy reorg and have certainly far underperformed FCAU. What do you all think they are failing to do that Fiat has done?

Fiat traded way below fair value after execution. GM was already executing but also failed to do anything that unlocked value honestly. I think they listen to institutions too much, and never reaped any benefits from doing so, while Sergio just made the value come out.


Shooter MacGavin

  • Full Member
  • ***
  • Posts: 120
Re: FCAU - Fiat Chrysler Automobiles
« Reply #2561 on: September 16, 2017, 07:24:27 AM »




on GM-
They are paying a dividend that increased every year until recently - why a cyclical company wanted to reinitiate a dividend is beyond me.  Hoard $20B of cash to be able to fund the dividend under all circumstances thereby hampering a buyback.  Paying into the legacy liabilities every year with FCF and barely making a dent thereby hampering a buyback.  Paying ignition switch liabilities.  Paying a settlement for making the stock go down due to the ignition switch liabilities (paying off one group of formers shareholders with current shareholders money?). Doing stupid acquisitions with cruise automation and Lyft.  Why GM needs to own the cash sinkhole of Lyft is beyond me.  Funding Opel for way longer than needed before finally selling it.  They shrank their stock 7% in 5 years when their shares were trading at 5-6x.  They could have bought the entire company by now if they repurchased shares.  GM's earnings quality is horrible.  When they say they are earning $6.50, you can bet that's not a clean $6.50, since $6.50 is not really available for capital allocation.  They don't even tell you the sharecount when they guide.  It's a joke.  When Mary Barra gets all these accolades from the press, I scratch my head. She may know cars, but she is terrible at finance. Tim Solso, who I was hoping would be the adult in the room, gave his chairmanship to Mary and then created a random title for himself.

FCAU on the other hand is a bit of a levered equity.  They didn't shrink the sharecount, but did some great financial engineering with their spin off of RACE.  Sergio feels pain when capital is sitting around doing nothing. FCAU's capex investments paid off handsomely by locally producing Jeep in South America and China and increasing capacity in North America.  They have shown you that they know how to grow the earnings and unlock the value of really good assets.  The stock responds to the sum-of-parts theses put forth by the sell side because the market has a reason to believe they will do what it takes to surface the value in the share price. 

And if the market still puts a 4x on earnings in 2018/19 on whatever stub is left, you can bet FCAU will spend every dollar to buyback stock.

cubsfan

  • Sr. Member
  • ****
  • Posts: 465
Re: FCAU - Fiat Chrysler Automobiles
« Reply #2562 on: September 16, 2017, 07:58:07 AM »
I've owned GM since the bankruptcy reorg and have certainly far underperformed FCAU. What do you all think they are failing to do that Fiat has done?

One of my very smart friends offered this opinion: The Elkann Family has a goal to exit FCAU, has the right CEO driving the process that totally aligns with shareholders (of which the Elkann Family is the largest).  GM on the other hand, still has no such alignment, and little inside ownership, and the CEO is having difficulty changing the culture quickly and driving the process.
This makes sense to me. It comes down to incentives and shareholder alignment.

For what it's worth.

JRM

  • Newbie
  • *
  • Posts: 12
Re: FCAU - Fiat Chrysler Automobiles
« Reply #2563 on: September 16, 2017, 10:36:57 AM »
Shooter, you forgot to mention Maven.  Unless you feel differently about that acquisition.

Both GM and FCAU slipped and fell into the best truck/SUV buying frenzy maybe ever.  Combine cash for clunkers, low interest rates, and cheap gas; so much demand has been pulled forward for high margin trucks and SUVs.  I think GM is patting themselves on the back for great execution, but they just happened to be in the right spot at the right time.  Ford invested in the aluminum truck, which may have actually hurt them vs GM and FCAU due to the high cap ex and higher priced truck.

Its appalling to me that GMs share count hasn't been reduced further even with its stated buybacks.  Management stock options are rampant.

I passed on FCAU because their products are garbage quality when compared to GM or Ford, much less the foreign automakers.  I can't own a company whose products I don't believe in.  My loss.

rohitc99

  • Full Member
  • ***
  • Posts: 162
Re: FCAU - Fiat Chrysler Automobiles
« Reply #2564 on: September 16, 2017, 01:48:38 PM »
Shooter, you forgot to mention Maven.  Unless you feel differently about that acquisition.

Both GM and FCAU slipped and fell into the best truck/SUV buying frenzy maybe ever.  Combine cash for clunkers, low interest rates, and cheap gas; so much demand has been pulled forward for high margin trucks and SUVs.  I think GM is patting themselves on the back for great execution, but they just happened to be in the right spot at the right time.  Ford invested in the aluminum truck, which may have actually hurt them vs GM and FCAU due to the high cap ex and higher priced truck.

Its appalling to me that GMs share count hasn't been reduced further even with its stated buybacks.  Management stock options are rampant.

I passed on FCAU because their products are garbage quality when compared to GM or Ford, much less the foreign automakers.  I can't own a company whose products I don't believe in.  My loss.

To be fair, its partly luck but FCAU also took what they got and ran well with it. In early 2016, when the trend towards trucks and SUV was clear, FCAU was one of the first companies to re-align their capacity towards these vehicles. they took some charges on it and the stock was punished for it. analysts continued to focus on volume drop in some of the sedan segments even as the company was re-adjusting its NA capacity to the high margin products.

i think marchionne was dealt a crappy hand and he has played the best a CEO can play under the circumstances. For all these years, the company has continued to hits targets and everyone has just refused to believe the numbers ..till ofcourse they cannot ignore it.

at various points the company was priced as if bankruptcy was round the corner and EV/ self driving cars would take over the world in 1-2 years. I guess it will take a little bit longer than that for the company to dissapear

Sergio8

  • Newbie
  • *
  • Posts: 9
    • L'Investisseur Franšais
Re: FCAU - Fiat Chrysler Automobiles
« Reply #2565 on: September 17, 2017, 03:39:45 AM »
I've owned GM since the bankruptcy reorg and have certainly far underperformed FCAU. What do you all think they are failing to do that Fiat has done?

Maybe GM should capitalize their R&D costs and inflate earnings (as done by FCAU)? That would lower their PE ratio even more and make it more comparable to FCAU.

JRM

  • Newbie
  • *
  • Posts: 12
Re: FCAU - Fiat Chrysler Automobiles
« Reply #2566 on: September 17, 2017, 07:18:35 AM »
I know this is a thread about FCAU, but I guess this is still loosely related.

I feel like GM should spin off its Maven, Cruise, and Lyft "businesses".  The market is loving these pie-in-the sky startup-like companies and awarding ridiculous multiples. Meanwhile these "growth" parts of GM are punished with the same low multiple as the rest of GM.  In the spirit of Fiat, maybe GM should spin these off so that they can be better capitalized and have a fighting chance against over-capitalized competitors.  To me this is much more simplistic and easy for the market to digest than what Einhorn proposed or any type of preferred shares.

Shooter MacGavin

  • Full Member
  • ***
  • Posts: 120
Re: FCAU - Fiat Chrysler Automobiles
« Reply #2567 on: September 17, 2017, 01:38:59 PM »
Shooter, you forgot to mention Maven.  Unless you feel differently about that acquisition.

Both GM and FCAU slipped and fell into the best truck/SUV buying frenzy maybe ever.  Combine cash for clunkers, low interest rates, and cheap gas; so much demand has been pulled forward for high margin trucks and SUVs.  I think GM is patting themselves on the back for great execution, but they just happened to be in the right spot at the right time.  Ford invested in the aluminum truck, which may have actually hurt them vs GM and FCAU due to the high cap ex and higher priced truck.

Its appalling to me that GMs share count hasn't been reduced further even with its stated buybacks.  Management stock options are rampant.

I passed on FCAU because their products are garbage quality when compared to GM or Ford, much less the foreign automakers.  I can't own a company whose products I don't believe in.  My loss.

To be fair, its partly luck but FCAU also took what they got and ran well with it. In early 2016, when the trend towards trucks and SUV was clear, FCAU was one of the first companies to re-align their capacity towards these vehicles. they took some charges on it and the stock was punished for it. analysts continued to focus on volume drop in some of the sedan segments even as the company was re-adjusting its NA capacity to the high margin products.

i think marchionne was dealt a crappy hand and he has played the best a CEO can play under the circumstances. For all these years, the company has continued to hits targets and everyone has just refused to believe the numbers ..till ofcourse they cannot ignore it.

at various points the company was priced as if bankruptcy was round the corner and EV/ self driving cars would take over the world in 1-2 years. I guess it will take a little bit longer than that for the company to dissapear

I think the SUV trend was good luck, but also rapid adaptation.  Trucks on the other hand were actually part of my thesis for owning GM/GM.WTB from as early as 2013.  In fact, I posted that a few times on the GM board.  Trucks are correlated with housing starts.  And housing starts have been slowly normalizing driving the growth in trucks.  I think the detroit three benefitted immensely from this.  Mark Reuss at GM had the foresight to introduce a mid sized truck that seems to be doing a good job not cannabalizing their larger trucks. 

I think GM executed well because of Mark Reuss and Dan Akerson, not Mary Barra.  I want to cheer on Mary, but the truth is she's not great.