By on August 23, 2018

In a story that’s been developing for some time now, Fiat Chrysler is inching closer to shedding its component supplier, Magneti Marelli.

According to a report, a private equity firm is reportedly in talks with the automaker to buy the parts business. This is a shift in direction for FCA which, in the past, was seemingly focused on spinning off Magneti Marelli rather than completing an outright sale.

The Wall Street Journal reports that an American buyout firm called KKR & Co. is in talks with FCA. The parts biz is estimated to be worth anywhere between $3.5 billion and $6.0 billion, depending on which analyst you ask. Whatever the sale price, it would be a large infusion of cash into the company’s coffers.

Mention of Calsonic was also uncovered by the WSJ during its research into KKR. Sound familiar? It should. Calsonic Kansei Corporation is a Japanese automotive parts company that has 58 manufacturing centers around the globe. The purchase of Magneti Marelli would create an auto parts giant and would likely lead to, erm, consolidation both from production and design considerations as there would be a measure of overlap with which to deal.

Sergio Marchionne was well-known for boldly stating his desire for alliance in the auto industry, as anyone with even the shortest of short-term memories will recall. Three years ago, he made major overtures to complete an FCA-GM merger, citing the ruinous financial wastage thanks to the duplication of models, technology, and R & D. The man had a point.

Sans Magneti Marelli, FCA would be an easier pitch, not unlike when a homeowner who is trying to sell their house tears down a handy but expensive-to-keep shed that was scaring away all potential buyers. Sure, the shed was useful but its additional maintenance costs made the entire package less attractive.

At this year’s Capital Markets Day, the company spelled out a five-year plan (one of many over the years) that appeared to blatantly ignore some of its brands while putting others to the fore. Any potential suitor for FCA would undoubtedly be taking it on for the crown jewel, Jeep. The absence of Magneti Marelli may be seen as a plus by some prospective purchasers.

Who would want to buy the joint? Speculation ranges from the PSA Group to Korean interests. A tie-up with PSA would give that company, which hopes to regain a foothold in America, an instant dealer network and all manner of local inroads. As for the Koreans, access to FCA’s successful crossover and SUV portfolio would do wonders to bolster their offerings in those segments.

Magneti Marelli manufactures numerous automotive components, from lighting to powertrain parts to electronics, and employs roughly 43,000 workers in 19 countries. Dozens of manufacturing plants exist under its umbrella. Started as a joint venture between Fiat and Ercole Marelli in 1919, the company officially became a Fiat subsidiary in 1967.

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10 Comments on “In Vendita: FCA’s Magneti Marelli Could Be Sold, Not Spun Off...”

  • avatar

    yes, because being owned by private equity sharks always turns out great.

  • avatar

    What’s the logic on why FCA is an easier sale without Magneti Marelli? The unit seems to be profitable.

  • avatar

    Bloomberg was also reporting this yesterday, but you didn’t need to be a subscriber to read the article.

    PE seems to really ruin most things it touches (see Toys R Us, Chrysler, etc.).

    If M-M is combined with Calsonic, KKR probably wants to unload it as some kind of global auto supplier, of course after injecting some “synergies”.

    It still looks strange to see M-M on a box with Mopar too.

    • 0 avatar

      PE firms are little more than piranha. They take on debt in order to buy a company, then put that debt on that company’s books and make them responsible for servicing it. If that causes the company to fail, the PE piranha come out of it relatively unscathed.

      “Less attention was paid to the albatross that Bain, KKR, and Vornado had placed around the company’s neck. Toys “R” Us had a debt load of $1.86 billion before it was bought out. Immediately after the deal, it shouldered more than $5 billion in debt. And though sales had slumped before the deal, they held relatively steady after it, even when the Great Recession hit. The company generated $11.2 billion in sales in the 12 months before the deal; in the 12 months before November 2017, it generated $11.1 billion.”

      and nobody seems to have a problem with this.

      just goes to show that “it’s legal” doesn’t necessarily mean “it’s right.”

  • avatar

    Will it be possible for one little internet voice to speak-out and to say:

    As an American with motor oil in his veins– and a lifetime Mopar guy– I will like to stop this train.

    Sincerely, y’all. This is madness– and we’ll be down to a first-world v. chinese copy choice to meeting our transportation and basic personal freedom needs if the government and people of the United States don’t step in, again, and repatriate Chrysler.

    Are Kickstarters over? lol

  • avatar

    With a spinoff, the ruling Agnelli family would own a piece of the spinoff, as they did with Ferrari. A sale provides cash to FCA or is distributed to shareholders. The Agnelli family holding company, Exor, wants to be a player in venture capital through Exor-Seeds, so it’s possible about one third of the proceeds of the sale (Exor owns a controlling 34% of FCA) would go to Exor to provide venture capital investments, if the cash is distributed.

  • avatar

    Maybe because I’m familiar with Lucas electrics, but the few times I’ve helped work on Fiats their system was a confusing mess. Of course that was old cars from the 50s thru 70s, so maybe they aren’t that bad anymore.

  • avatar

    Personally speaking I think a tie up with PSA would make huge sense. Instant volume in Europe meets instant instant volume in the US.

    The other suitor other than Hyundai for FCA might be Tata. Land Rover and Jeep have obvious synergies, as do Alfa and Jaguar. Tata brings volume in Asia plus a heavy truck business. Jaguar also brings electrification…..

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