Analysts: Chrysler Worth More Than Fiat
Published: September 22nd, 2010
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Despite not having spent a dime on the US firm, Fiat is widely credited with “rescuing” Chrysler. Here’s another way of looking at it: the United States taxpayers bailed out Fiat, an Italian firm with no presence in the US market. For no money down, Fiat got a 20 percent stake in a Chrysler that, although troubled, had been rinsed clean in bankruptcy. Now, analysts looking at Fiat’s spin-off of its automotive unit are telling Automotive News [sub] that
Fiat’s 20 percent stake in Chrysler, currently with a zero book value, is the biggest positive element seen by analysts for the new Fiat S.p.A., which will comprise the Fiat, Alfa Romeo, Lancia, Ferrari and Maserati car brands when it starts trading on Jan. 3. Fiat’s truck and tractor units will be spun off on the same day into a new unit called Fiat Industrial S.p.Analyst estimates place the value of Fiat’s 20 percent stake in Chrysler at between 45 and 53 percent. Including synergies, Fiat’s stake in Chrysler is said to account for between 60 and 74 percent of Fiat Automotive’s projected value of €5.20 and €7.40 per share. The fact that the US auto task force “ struggled to persuade [Fiat CEO Sergio Marchionne] to put up some cash” for a deal that more than doubled his company’s value, makes this news something of an embarrassment for the White House. Fiat is likely to eventually buy a controlling stake in Chrysler, and if, as has been widely speculated, GM ends up being owned by Chinese firms, the Great American Auto Bailout will end with both “rescued” firms in foreign ownership. Which, incidentally, is how the British Leyland experiment ended. And it’s all just a little bit of history repeating…
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Good point. But, after two truly HORRIFFIC marriages, I would imagine that a third that is merely imperfect would be pretty welcome.
Edward, Love your articles as I do, but this really is on the wrong side of misinformed. While it would be a cheap shot to question the sanity of said analysts (*cough* Lehman Brothers *cough*), I sincerely cannot imagine how on earth they came to the conclusion that "including synergies, Fiat’s stake in Chrysler is said to account for between 60 and 74 percent of Fiat Automotive’s projected value of €5.20 and €7.40 per share." I beg your pardon? As far as I recall, investors weren't exactly trampling the door down to buy Chrysler - appalling management, piss-poor engineering, and quite possibly the worst product range in automotive history (excluding Jeep perhaps, but let me remind you that outside North America, its perception ranges from "Who?" to laughing stock). To even compare the brand equity with Ferrari's is an absolute joke. As for Chrysler's and Dodge's brand cachet, well - that was down the drain even within the US. In Europe, anyone buying a Dodge will receive countless recommendations from friends and family alike to have their head examined. (And rightly so.) Ferrari can sell perfume with the prancing horse - and I don't think the launch of Dodge Caliber After Shave will be celebrated any time soon. FIAT also owns Maserati (both profitable, mind you) and Alfa Romeo. And unlike Chrysler and Dodge, FIAT is still a much-loved brand in its home market (which, admittedly, is somewhat smaller than the US). Most other car manufacturers would not touch Chrysler with a ten-foot pole, and can I also remind you that most analysts and pundits at the time thought that Sergio Marchonne must be off his rocker. As for American companies owned by foreign investors - is there a law in the US that keeps American investors from buying within the country?