By on October 2, 2017

magneti-marelli

Fiat Chrysler is trying to work some financial magic to make itself look more appetizing to prospective investors. However, few buyers are likely to be interested in the whole of FCA. Its North American half has proven adept at assembling sport utility vehicles and Jeep would be a tasty morsel for any company hoping to expand its portfolio. But the Italian arm’s focus on smaller automobiles could get in the way of a potential deal — especially if the buyer already has their own.

CEO Sergio Marchionne wants the company to be purchased by an established automaker, but there are precious few that would want everything it has to offer. One possible solution is to separate subsidiaries from the core group. Marchionne says that might be the best solution for dealing with component supplier Magneti Marelli.

FCA has been of the mind that streamlining the business is the best way to attract investors without harming subsidiaries. After all, it worked well enough for Ferrari. The brand was spun off from FCA in late 2015, and its stock valuation embarked upon a rocket ride to the moon the following month. 

According to Reuters, Marchionne said Magneti Marelli would likely follow Ferrari’s path towards becoming a separate entity, with remaining shares distributed to FCA’s existing shareholders. 

“We will press ahead with [a separation] in 2018, it will be part of the business plan we will present next year,” he told journalists during an event in Rovereto, Italy. He also indicated there are no present plans for a merger or sale, but said FCA is focused on its debt-elimination plan and will be cash positive sometime next year.

Magneti Marelli could be a large part of that. Currently valued at roughly $6 billion, the parts manufacturer could be more useful to Fiat Chrysler as a sacrificial lamb.

However, Marchionne didn’t have anything definitive to say about Alfa Romeo and Maserati’s future. While it has been rumored that the two brands would eventually be cut from the group to improve the likelihood of a buyout, Marchionne said it was too early to make assumptions. He indicated that the two could stay with FCA through 2022, but didn’t want to speculate further.

FCA has been the subject of numerous takeover rumors over the last few weeks. Its share price has increased significantly in August after reported interest from several Chinese automakers. Those claims were swiftly followed by talk of the company joining with South Korea’s Hyundai.

magneti-marelli-with-sergio-fca

While Marchionne hasn’t made it a secret that he’s looking for a buyer, he shrugged off claims about any potential deal in Asia. He said FCA would stay the course and focus on profitability. “Given the way the euro is moving, we’re going to do nothing,” he said.

Indicating that business is going well, he mentioned FCA would not be raising targets when it releases its third-quarter results — pointing to market uncertainty as the primary reason. He also voiced his worry that some automakers are taking too narrow a view of the future and throwing too much behind electrification without considering the ramifications.

“It’s too early to assume that by itself electrification will solve the problem,” he said. “It won’t.”

Instead, Marchionne said automakers would be wise to remain flexible and implement a range of solutions with an eye for new technologies. He believes the industry has been slow to embrace modern industrial sciences and could suffer for it in the long run. “The biggest fear that I see is that [the automotive industry] will be left behind,” he explained.

[Images: Magneti Marelli]

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24 Comments on “FCA’s Sergio Says Spinning Off Magneti Marelli is His Best Option...”


  • avatar

    Peter DeLorenzo believes it’s Hyundai.

    http://www.autoextremist.com/current/2017/10/2/sergio-polishes-the-golden-cannoli-as-the-sale-of-fca-is-nig-1.html

  • avatar
    PrincipalDan

    Magneti Marelli – Should I feel bad that I had to look them up on Wikipedia just to figure out what the French Toast they actually do?

    Seems like a desirable company to me.

    Sergio – Why would you want to divest (spin off) the desirable pieces to somehow make the pie more attractive?

    • 0 avatar
      YeOldeMobile

      Basically the idea is that buyers aren’t interested in the whole pie, they just want specific bits of it to shore up their own weaknesses. So you spin-off some of the sections that can survive on their own and make money as the value of that spin-off rises.

      • 0 avatar
        Lorenzo

        In other words, parting out the company. That’s what was done with the Agnelli’s Fiat conglomerate, spinning off various parts into separate companies that the Agnelli’s owned a piece of, until Fiat auto group was all that was left, holding a pot of debt. Sergio lucked out and was able to “buy” Chrysler, but now it looks like he’ll have to do the same thing with FCA that he did with old Fiat industrial.

    • 0 avatar
      SCE to AUX

      My 74 Fiat was filled with Magneti Marelli electrical parts, which means their name is seared into my memory.

  • avatar
    deanst

    Fiat has as much value as gm’ s European operations – i.e. Negative. It would be wise for someone to buy jeep or ram, but there probably wont be much of dodge or Chrysler left to sell once Sergio’s done with them. Too bad vw’s a bit cash poor these days – I’m sure they would still like alfa and/or Maserati.

    • 0 avatar
      Lorenzo

      Not so. A buyer of the European Fiat business has a major share of the Brazilian market via Fiat Brazil. Magna was willing to buy the GM european operation for the right price, so maybe it would be interested?

      The company that did buy the GM operation, Peugeot, might also be interested, if only for the Brazilian/South American market opportunity. After all, Carlos Tavares of Peugeot speaks Portuguese and is an ambitious guy playing with Chinese money, and the Chinese weren’t able to get a foothold in Brazil.

  • avatar
    SCE to AUX

    “He also voiced his worry that some automakers are taking too narrow a view of the future and throwing too much behind electrification without considering the ramifications.”

    Says the man who despises his own engineers’ work on the Fiat 500e, and begged consumers not to buy it.

    • 0 avatar
      Lorenzo

      He also disparaged the Jeep Commander and dropped it, the only 7 passenger Jeep he had, just before the 3-row SUV market took off. He’s a deal-maker, not an industrial manager.

  • avatar
    SCE to AUX

    I hold a contra opinion about Jeep – I see them as overvalued, a future has-been.

    Jeep sales are currently in substantial decline (in a rising SUC/CUV market), and it is poorly positioned to meet rising CAFE requirements on its own. A mythical buyer could find Jeep to have negative momentum, requiring a ma$$ive overhaul of the product line to make it relevant again.

    Then they’d get passed around like a cheap date, looking for a new home.

    • 0 avatar
      SlowMyke

      I don’t have the specific model sales in front of me, but I’d bet that over the next 2 years Jeep sales will look a lot different. The new Wrangler and scrambler will be out, shoring up flagging Wrangler sales, a new GC is supposed to be on its way as well. The new compass is just starting to get a foot hold and the effect of replacing the Patriot and old compass with one model will sort itself with it. The renegade is a sales leader in it’s segment. The weakest spots for Jeep right now are the Cherokee and lack of a full size. Sergio is just shit at managing the timing of all these models and their replacements. Had he not tried riding Jeep as is for so long while dicking around with maserati and Alfa i think Jeep would have not had the lull is going through now waiting on so many transitions at once.

    • 0 avatar
      BigOldChryslers

      > Then they’d get passed around like a cheap date, looking for a new home.

      So, pretty much the same as always.

  • avatar
    ash78

    TIL that this company isn’t just from the signs found in racing video games.

    Sergio’s Detroit staffers are like “Magneti? How the f*ck do they work?”

  • avatar
    indi500fan

    We saw how well slicing off the component mfg arms did for GM, right?
    Oh well, this time will be DIFFERENT!

  • avatar
    Ko1

    Maybe it’s just me but has anyone ever noticed how Jeep always seems to be the last part of any company that has bought/inherited/merged with it to be worth a damn at the end?

  • avatar
    VoGhost

    Sell Alfa to VW; sell Ram to Nissan and Jeep to the highest bidder. Dissolve what remains.

  • avatar
    olddavid

    Are they still the owners of Teksid? I’ve had several cars with their blocks go almost 200k w/o problem. I see Fiat as a collection of misfit toys. If you cannot make money at 17m per year volume, you’re in the wrong business. And, maybe that’s the point?

  • avatar
    ahintofpepperjack

    It’s strange to me that I never hear about this company. There are several newer FCA products in my family and I can’t say I’ve ever seen a Magneti Marelli part in any of them. Does Magneti Marelli only supply parts to the Europeans?

  • avatar
    WildcatMatt

    “He also voiced his worry that some automakers are taking too narrow a view of the future and throwing too much behind electrification without considering the RAMifications.”

    I see what you did there.

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