By on April 21, 2010

Much of the speculation in the leadup to Fiat’s five year plan announcement centered on a long-rumored spin-off of Fiat’s auto business from the rest of the industrial conglomerate. Speculators even drove up Fiat’s share price considerably yesterday on hopes that the long-awaited spin-off would be announced today. And sure enough, Fiat did announce today that it would be spinning off part of its business. The only problem, according to Automotive News [sub], is that the newly-formed unit isn’t made up of Fiat, Alfa and Lancia, but Iveco and New Case Holland. Instead of its car operations, Fiat is bundling off its heavy commercial truck and tractor business into a new entity known as Fiat Industrial S.p.A. (Fiat-branded light commercial vehicles and Fiat Powertrain will remain behind).

Needless to say, this move comes as a significant surprise to most observers and analysts. By not creating a separate auto unit, Fiat is forgoing an opportunity to enable easier alliances in the future, and launch a share sale to fund planned growth. But then, with turnarounds afoot at most of its auto brands, including a challenging integration with Chrysler, Fiat’s car business doesn’t need to be distracted by the possibility of future alliances. Making the current hodgepodge of brands it currently has in Fiat-Chrysler work will be tough enough. And with heavy commercial vehicles operating independently, analysts will still have a better sense of Fiat’s overall and auto division performance. According to Reuters, the spin-off will be complete by the end of this year.

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7 Comments on “Fiat Five Year Plan: Cars Stay, Trucks and Tractors Go...”

  • avatar

    That should read Case New Holland, city slicker :)

  • avatar

    So it will still be Fiat but won’t be Fiat? What is the advantage of “spinning off” a heavy truck business?

    Is this the same thing as Volvo cars separating from Volvo trucks? Or Saab and Scania?

  • avatar
    Rod Panhard

    “Spinning off” the car business makes it easier to do a couple of things. One is that when it’s time for another acquisition, they don’t have to air all the company’s dirty laundry, just that division’s. Since Fiat acquired Chrysler for “free,” the only people concerned about Fiat’s books were the UAW and the oh, I dunno, funny money guy Steve Rattner would be my guess. But since it was really not something that there was a choice in, the books didn’t matter. So Fiat got what’s left of Chrysler for “free.” Books weren’t needed!

    In the future, Fiat won’t be so lucky. Since it looks like it’ll be a long time before they reach the magic number of 5 million units per year, they’re going to have to either acquire more automakers or sell. Spinning off the car business makes either situation easier.

  • avatar
    Tricky Dicky

    What people seem to be forgetting is that the Auto business is ‘core’ for Fiat and not something to be spun off. Marchionne will remain CEO of Fiat Group (Automobiles) nad Fiat Industrial (Commercial Vehicles and Agricultural equipment). The key driver behind the activity is for greater transparency with the investment community.

    Cars and Trucks// Agriculture have different business cycles, product development needs and financing requirements. If everything is thrown together in one set of books, it makes it less easy for an investor to understand what is going on, so they stick to caution. Fiat as a group are anything but cautionary.

    This restructuring allows for greater focus by management teams and (they hope), deeper trust from the banks because of their transparent behaviour. If any of you read financial reports, you will see a stark contrast for example with Renault. Everything is obscured and they never make like for like comparisons. It’s all fuddle and disguises.

    I’ve just read through some of the 5 year plan presentations Fiat have put out. Stunningly clear. And optimistic of course ;-)

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