It’s not often that a new OEM rides into town, but there’s one that has just started trading on the New York Stock Exchange. This company has bullish ambitions to more than double its sales by 2018; its hugely ambitious Chief Executive has experience of running two separate car manufacturers – at once – and now plans to make a success of one global company; and it has a model portfolio that ranges from small European city cars to large American SUVs, via luxury and high end sports cars. With a background in finance, the CEO has a rigid plan in place that he anticipates seeing through.
On 13 October, Sergio Marchionne, the Chief Executive of Fiat Chrysler Automobiles (FCA) opened trading at the NYSE. Traders passed by a line of cars including Fiat, Chrysler, Jeep, Alfa Romeo and Ferrari models on their way into the building for the launch of Marchionne’s new stock, FCAU, at US$9 a share. (By comparison, Ford and GM currently trade at around US$13.50 and US$29.50 respectively.) Just over 5 million FCAU shares were subsequently traded on Monday.
Marchionne has for several years said that a successful global OEM needs to be selling 6 million units a year. In recent days, he has even suggested there is sufficient room for a new mega-merger in the automotive industry that would create an OEM larger than Toyota
Chrysler is, of course, no Wall Street newcomer. “One of the Detroit Three is coming home,” said Marchionne. Chrysler’s last Wall Street appearance – in any guise – ceased in August 2007 when Daimler sold to Cerberus the 80.1% stake it had bought in Chrysler in 1997.
The creation of FCA was approved by Fiat shareholders in August, and the merger was completed in October, creating the seventh-largest global OEM, with stocks traded in Milan and now on the NYSE. Marchionne has for several years said that a successful global OEM needs to be selling 6 million units a year. In recent days, he has even suggested that further automotive industry M&A activity can be expected – he believes there is sufficient room for a new mega-merger in the automotive industry that would create an OEM larger than Toyota.
Monday wasn’t a great first day of trading for the homecoming team, closing down slightly at US$8.92; but the NYSE, along with other indexes, was down as a whole by the end of a day of significant selling activity amid concerns about the strength of the global economy. It’s turning out to be a tough week to launch a new stock, too, with jittery markets seeing share prices continue to fall.
By 2018, Marchionne is hoping that FCA’s US$60bn investment programme will enable the OEM to achieve 7 million sales globally, an operating profit of 7% and an increase in net profit to almost US$7bn.
One target that looks certain to be achieved in 2018 is the culmination of Marchionne’s tenure at the head of FCA…His legacy will be decided by how close he gets FCA to his stated targets, and reflected in the value of that FCAU ticker.
There’s plenty for the company to do to achieve these targets. Across the BRIC markets, Fiat’s Brazilian gold mine is shrinking; the Russian market is down significantly and shows no signs of a recovery any time soon; India, where Jeep will launch shortly, has never been a great success story for Fiat; and in China there is much to be done to grow Fiat and develop the Jeep brand. All mainstream OEMs are struggling in Europe, and it’s only the US market that can be called buoyant. Ironically, given that Fiat rescued the ailing US OEM in 2009, it’s Chrysler that’s now supporting Fiat.
One target that looks certain to be achieved in 2018 is the culmination of Marchionne’s tenure at the head of FCA; he’s confirmed plans to step down then, with no intention of overseeing another turnaround. His legacy will be decided by how close he gets FCA to his stated targets, and reflected in the value of that FCAU ticker.
Martin Kahl is Editor, Automotive World.
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