Fiat Chrysler Offloads Magneti Marelli Parts Unit for $7.1 Billion

Steph Willems
by Steph Willems

A key goal of Fiat Chrysler Automobiles’ financial fitness regimen, started under former CEO Sergio Marchionne, has come to pass under his successor, Mike Manley.

On Monday morning, FCA announced the sale of its Italian parts unit, Magneti Marelli, to Japan’s Calsonic Kansei, itself owned by KKR & Co. The deal, worth $7.1 billion, sees the parts unit don the name Magneti Marelli CK Holdings. It’s likely very good news if you’re an FCA shareholder.

In a joint statement, FCA and Calsonic Kansei said the acquisition, once approved, would create the world’s seventh largest independent automotive parts supplier. Magneti Marelli specializes in lighting, electronics, powertrain components, suspension parts, and exhaust.

“FCA has also agreed to a multi-year Supply Agreement that will further strengthen a mutually beneficial relationship for both Magneti Marelli and FCA’s expanding model range and which will sustain Magneti Marelli’s Italian business operations, positioning it strongly for continued growth and success in the future,” the automaker said.

Once the transaction closes in the first half of 2019, Calsonic Kansei CEO Beda Bolzenius will take the helm of the unified, Japan-based company. Current Magneti Marelli CEO Ermanno Ferrari will sit on the company’s board.

Marchionne had hoped to create a slimmer FCA, and shedding Magneti Marelli was at the top of that list. Early plans to spin off the parts unit collided with market storm clouds in Italy. Rather than threaten the company’s future with a stock listing, the automaker opted for an outright sale, potentially bringing a payday to FCA shareholders.

Joel Levington, a senior credit analyst at Bloomberg Intelligence, claims the sale might create $2 billion in dividends for investors.

“Having carefully examined a range of options to enable Magneti Marelli to express its full potential in the next phase of its development, this combination with Calsonic Kansei has emerged as an ideal opportunity to accelerate Magneti Marelli’s future growth for the benefit of its customers and its outstanding people,” said FCA CEO Mike Manley in a statement.

“The combined business will continue to be among FCA’s most important business partners and we would like to see that relationship grow even further in the future.”

Media reports from September claimed FCA wasn’t willing to drop below a $7 billion price tag in its negotiations with KKR, rejecting an earlier offer from the company.

[Image: Magneti Marelli]

Steph Willems
Steph Willems

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  • Fred Fred on Oct 22, 2018

    Selling off is the beginning of the end for FCA. If they start to go into debt expect the worse. Get your Hellcat now!

    • See 1 previous
    • Fred Fred on Oct 22, 2018

      @MLS You are pretty hip there with the urban text, had to look it up. I just read an article about how private equity firms robbed grocery store chains and part of the strategy is sell off assets and saddle them with debt. I'm not saying that's what is happening, just that maybe.

  • CincyDavid CincyDavid on Oct 22, 2018

    The WORST parts on my late, lamented Volvo C70 were Magneti Marelli...stupid electronic throttle module bedeviled me for years. Italian electrical & electronic parts are not a much better idea than English parts (Lucas anyone?!?)

  • Jeff Self driving cars are not ready for prime time.
  • Lichtronamo Watch as the non-us based automakers shift more production to Mexico in the future.
  • 28-Cars-Later " Electrek recently dug around in Tesla’s online parts catalog and found that the windshield costs a whopping $1,900 to replace.To be fair, that’s around what a Mercedes S-Class or Rivian windshield costs, but the Tesla’s glass is unique because of its shape. It’s also worth noting that most insurance plans have glass replacement options that can make the repair a low- or zero-cost issue. "Now I understand why my insurance is so high despite no claims for years and about 7,500 annual miles between three cars.
  • AMcA My theory is that that when the Big 3 gave away the store to the UAW in the last contract, there was a side deal in which the UAW promised to go after the non-organized transplant plants. Even the UAW understands that if the wage differential gets too high it's gonna kill the golden goose.
  • MKizzy Why else does range matter? Because in the EV advocate's dream scenario of a post-ICE future, the average multi-car household will find itself with more EVs in their garages and driveways than places to plug them in or the capacity to charge then all at once without significant electrical upgrades. Unless each vehicle has enough range to allow for multiple days without plugging in, fighting over charging access in multi-EV households will be right up there with finances for causes of domestic strife.