Fiat Chairman Luca Cordero Di Montezemolo will be leaving the firm to pursue a career in Italian politics, according to Automotive News [sub]. Montezemolo will remain on Fiat’s board, and will continue to serve as chairman of Ferrari, but he will be replaced atop the Fiat empire by vice-chairman and Agnelli family heir John Elkann. Fiat’s shares rallied considerably this morning, according to Bloomberg Businessweek, but not because Montezemolo is on the way out. Rather, Fiat has finally announced the news that speculators have been waiting patiently for: the firm now confirms that it plans to spin off its auto business.
Details of the spin-off are not immediately available, as Fiat CEO Sergio Marchionne will not be presenting Fiat’s five-year plan until tomorrow. The spin-off is almost certain to center around Fiat, Abarth, Alfa-Romeo, and Lancia, although it appears that there may be a chance that Maserati could be bundled with Fiat Auto as well, despite being traditionally run as part of Ferrari. Fiat’s other industrial ventures, including its farm- and heavy-equipment manufacturing as well as its Iveco commercial vehicle unit will remain behind with the conglomerate. The main benefit of spinning-off Fiat’s auto business lays in future alliances: with a smaller market cap than the entire Fiat empire, a Fiat Auto unit could more easily enter equity exchanges and other alliances. Already holding a 20 percent stake in Chrysler (with up to 35 percent available for free), Fiat will likely use the spin-off to pursue greater control over the Auburn Hills-based automaker. And with Fiat’s auto business already generating half of the sprawling Fiat Group’s revenue according to the NYT, Marchionne clearly expects the newly spun-off unit to be leaner and more profitable. For now though, the most important variable in the future of Fiat auto isn’t even its spin-off or the replacement of its Chairman. Breaking Chrysler’s downward slump is key to Marchionne’s 5m-unit global survival strategy, and the gambit is far from paying off.