Auto giant Fiat takes major step towards global megagroup
Italian auto giant Fiat yesterday announced board approval for a “demerger” of its non-car activities, a key step towards the dream of top executive Sergio Marchionne to create a global megagroup.
Marchionne, credited with rescuing Fiat from its own crisis well before the global financial crisis, is seen to be positioning the group to join the fray as major world automakers seek new alliances.
The news pushed Fiat shares up more than six per cent on the Milan stock market, causing a temporary suspension of trading at the start.
The group’s share price gained 5.25 per cent to €9.53 in overall trading that was up 1.42 per cent.
The maverick chief executive moved quickly to benefit from the bankruptcy of US carmaker Chrysler, becoming its chief executive after Fiat acquired an initial 20-percent stake in the company last year in a no-cash deal offering small-car and green technology.
Analysts expect the new structure to help Fiat integrate with Chrysler, which gives it a big distribution network in the United States, and to form other alliances as new players come onto the scene from emerging economies such as Russia and India.
The Italian-Canadian Marchionne has said the two companies combined would produce six million vehicles by 2014 from four million today.
The “demerger” calls for truck maker Iveco, agricultural and construction machines manufacturer Case New Holland and a part of engine maker Fiat Powertrain Technologies to be part of a new group to be called Fiat Industrial.
The operation will leave a car-only Fiat with its own brand plus Ferrari, Lancia, Alfa Romeo, Maserati and its components and motor activities.
Fiat said the move would “provide strategic and financial clarity to both businesses and enable them to strategically develop independently of each other.”
The change will also “allow for the proper valuation in the capital markets of these two businesses,” Fiat said in a statement.
For the time being, Fiat is maintaining its 2010 targets, but, citing improved demand, said it would “very likely” revise them upwards once third-quarter results are in.
Current targets include a turnover in excess of €50 billion and an operating profit of no more than €1.2 billion and a net result at or near the break-even point.
The group posted a net profit of €113 million in the second quarter compared with a loss of €179 million in the same period last year, it said yesterday. In 2009, the company lost €848 million as the global auto industry was devastated by the global financial crisis, and in the first quarter of 2010 Fiat posted a net loss of €21 million.
Chrysler, meanwhile, posted a loss of $3.8 billion for the period between June 10 last year - when it left bankruptcy protection - and December 31 but narrowed its 2010 first-quarter net loss to $197 million from $2.5 billion a year earlier.
Fiat’s “demerger,” first announced in April, will take effect on January 1, 2011, said the group, Italy’s biggest private employer with a national workforce of some 80,000.
Shareholders are set to approve the operation at a September 16 general assembly.
Fiat will roll out 34 new car models between 2010 and 2014, 13 of which are to be assembled by Chrysler in the United States and Mexico, Marchionne said in April.