In Vendita: FCA's Magneti Marelli Could Be Sold, Not Spun Off

Matthew Guy
by Matthew Guy

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.

Matthew Guy
Matthew Guy

Matthew buys, sells, fixes, & races cars. As a human index of auto & auction knowledge, he is fond of making money and offering loud opinions.

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  • Fred Fred on Aug 23, 2018

    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.

    • JimZ JimZ on Aug 24, 2018

      er, of course they're not that bad anymore. back then a lot of wiring was point-to-point, assembled by hand with simple unsealed push on spade connectors.

  • Tstag Tstag on Aug 26, 2018

    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.....

  • Arthur Dailey Rootes Motors actually had a car assembly facility in Scarborough ( a suburb in the east end of Toronto), during the 1950's and early 1960s. It was on the south-west corner of Warden and Eglinton located at 1921 Eglinton Avenue East. The building still exists and you can still see it on Google maps. That part of Scarboro was known as the Golden Mile and also had the Headquarters for VW Canada, and the GM van plant.Also at 2689 Steeles Avenue West in Toronto (the south east corner of Steeles and Petrolia) is what is still shown on Google Maps as 'The Lada Building'. It still has large Lada signs and the Lada logo on the east and west facades of the building. You can see these if you go to the street view. Not sure how much longer they will be there as the building just went up for sale this month. In Canada as well as Ladas and Skodas we also got Dacias. But not Yugos. Canada also got a great many British vehicles until the US-Canada trade pact due to Commonwealth connections. Due to different market demands, Canadians purchased per capita more standards and smaller cars including hatches. Stripped versions, generally small hatchbacks, with manual transmission, windows, door locks and no A/C were known as 'Quebec specials' as our Francophone population had almost European preferences in vehicles. As noted in previous posts, for decades Canadian Pontiacs were actually Chevs with Pontiac bodies and brightwork. This made them comparatively less expensive and therefore Pontiac sold better per capita in Canada than in the USA.
  • Ronin Let's see the actuals first, then we can decide using science.What has been the effect of auto pollution levels since the 70s when pollution control devices were first introduced? Since the 80s when they were increased?How much has auto pollution specifically been reduced since the introduction of hybrid vehicles? Of e-vehicles?We should well be able to measure the benefits by now, by category of engine. We shouldn't have to continue to just guess the benefits. And if we can't specifically and in detail measure the benefits by now, it should make a rational person wonder if there really are any real world benefits.
  • TheEndlessEnigma Simply put, I like it.
  • TheEndlessEnigma Ah GM, never stop being you. GM is working hard to make FIAT look good.
  • TheEndlessEnigma Top Gear of the 2000's was a fresh concept and very well done. Sadly to say there isn't a TV show concept that doesn't eventually exhaust fresh ideas and, as a result, begins to rehash and wear out once were fresh ideas. The show eventually becomes a pale imitation of itself, then begins to embarrass itself, it will get to a point where it jumps the shark. Top Gear began to get stale, the Clarkson, Hammond and May left and the formula failed - surprise! the presenters were part of the magic. Fast forward many years and Grand Tower is trying hard to be Top Gear but it's all very obviously scripted (it always was by felt spontaneous in its original form), Clarkson, Hammond and May are much older, tired and have become caricatures of themselves. Guys, just stop. You should have stopped 10 years ago. Now you're just screwing with your reputations and legacies.