Marchionne's Grand Vision For FCA Faces Hard Financial Road To Success
Though Fiat Chrysler Automobiles CEO Sergio Marchionne’s five-year plan announced this week may be ambitious, analysts are raising questions about how the plan will be funded — and how much will be needed — if it is to be successful, let alone live up to Marchionne’s vision.
Automotive News Europe reports a large part of the problem for the plan, according to Bernstein Research analyst Max Warburton, is debt:
Much as we admire the ambition and think elements are achievable… it is hard to find conviction on the financing of the plan. Fiat is weighed down with huge debt, burdened by financing costs and is only thinly profitable. It’s (sic) cost of capital is huge.
Warburton adds FCA’s grand plan and its potential capital expenditure and R&D appear to be unaffordable and not prudent for investors, stating the company would need “a capital raise” for any part of the plan to pan out.
Aside from its debt, FCA also faces sales challenges from markets that are peaking or slowing down, with the European market being the biggest drag upon the automaker. However, independent analyst Marianne Keller said that with the recovery now taking place in Europe, paired with North American profits and a strong Jeep brand, Marchionne could “pull it off”; Marchionne himself announced during the five-year plan’s unveiling that he was considering a mandatory convertible bond to bring the needed financing for the plan.
Finally, FCA’s Q1 2014 results — a net loss of 319 million euros compared to a net profit of 31 million euros the year before — serve as a sign for both the company and its investors that FCA has more hard road ahead, a view best summed up by Macquarie Group analyst Jens Schattner:
If it was so easy just to launch new products to be successful in this industry, why wouldn’t everybody do exactly the same.
Seattle-based writer, blogger, and photographer for many a publication. Born in Louisville. Raised in Kansas. Where I lay my head is home.
More by Cameron Aubernon
Latest Car Reviews
Read moreLatest Product Reviews
Read moreRecent Comments
- Rover Sig 2021 Jeep Grand Cherokee Limited, like my previous JGC's cheap to keep (essentially just oil, tires) until recent episode of clunking in front suspension at 50K miles led to $3000 of parts replaced over fives visits to two Jeep dealers which finally bought a quiet front end. Most expensive repair on any vehicle I've owned in the last 56 years.
- Bob Hey Tassos, have you seen it with top down. It's a permanent roll bar so if it flips no problem. It's the only car with one permanently there. So shoots down your issue. I had a 1998 for 10 years it was perfect, but yes slow. Hardly ever see any of them anymore.
- 3-On-The-Tree 2007 Toyota Sienna bedsides new plugs, flat tire on I-10 in van Horn Tx on the way to Fort Huachuca.2021 Tundra Crewmax no issues2021 Rav 4 no issues2010 Corolla I put in a alternator in Mar1985 Toyota Land Cruiser FJ60 280,000mi I put in a new radiator back in 08 before I deployed, did a valve job, new fuel and oil pump. Leaky rear main seal, transmission, transfer case. Rebuild carb twice, had a recall on the gas tank surprisingly in 2010 at 25 years later.2014 Ford F159 Ecoboost 3.5L by 80,000mi went through both turbos, driver side leaking, passenger side completely replaced. Rear min seal leak once at 50,000 second at 80,000. And last was a timing chain cover leak.2009 C6 Corvette LS3 Base, I put in a new radiator in 2021.
- ChristianWimmer 2018 Mercedes A250 AMG Line (W177) - no issues or unscheduled dealer visits. Regular maintenance at the dealer once a year costs between 400,- Euros (standard service) to 1200,- Euros (major service, new spark plugs, brake pads + TÜV). Had one recall where they had to fix an A/C hose which might become loose. Great car and fun to drive and very economical but also fast. Recently gave it an “Italian tune up” on the Autobahn.
- Bd2 Lexus is just a higher trim package Toyota. ^^
Comments
Join the conversation
Is it nasty for me to say that I hope FCA succeeds if only because it will cause "Sweet Pete" DeLorenzo to choke on his own bile?
I'm onboard with Sergio. If you want a small insight into what his thought processes are, and his dedication and work ethic is, watch a 60 Minutes segment about him from about two years ago. I think I work hard, but Sergio would wear me out, even though I can't think of a boss who would be more exciting to help build a company with.