Fiat Said to Start Alfa Romeo Expansion With Own Funding – Bloomberg

Posted: Tuesday, May 06, 2014

Fiat SpA Chief Executive Officer Sergio Marchionne will cover the billions planned for new Alfa Romeos, Maseratis and Jeeps out of existing funds, without selling or spinning off any of the automaker’s brands, four people familiar with the matter said.

Fiat, which will lay out its five-year strategy today following the purchase of the rest of Chrysler Group LLC, will retain full ownership of all its marques, said the people, who asked not to be identified talking ahead of the announcement.

The plan, which will include a revised corporate structure and spending of as much as 9 billion euros ($12.5 billion) to end losses in Europe, will be focused on expanding Alfa Romeo, Maserati and Jeep into global nameplates, people familiar have said in recent months. The move is part of the CEO’s decade-long effort to turn Turin, Italy-based Fiat into a carmaker big enough to challenge General Motors Co., Volkswagen AG and Toyota Motor Corp.

“Key points of the investor day will be the strategy for Alfa Romeo and whether it can be funded with existing resources,” Philippe Houchois, a London-based analyst at UBS AG, wrote in a report to investors.

Fiat gained as much as 19 cents, or 2.2 percent, to 8.76 euros and was up 1.9 percent as of 9:20 a.m. in Milan trading. The stock has surged 47 percent this year, valuing the Italian manufacturer at 10.9 billion euros.




Photographer: Jin Lee/Bloomberg

The revival of Alfa Romeo is key to Marchionne’s plans for the merged carmaker. With allure stemming from classics like the iconic Duetto spider of the 1960s, Alfa has the potential to help drive profit for the group, in the same way that Audi does at VW, by commanding higher prices than mass-market models bearing the Chrysler, Dodge or Fiat badges. Close

The revival of Alfa Romeo is key to Marchionne’s plans for the merged carmaker. With… Read More

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Photographer: Jin Lee/Bloomberg

The revival of Alfa Romeo is key to Marchionne’s plans for the merged carmaker. With allure stemming from classics like the iconic Duetto spider of the 1960s, Alfa has the potential to help drive profit for the group, in the same way that Audi does at VW, by commanding higher prices than mass-market models bearing the Chrysler, Dodge or Fiat badges.

Rebuilding Alfa

Marchionne, who will lay out his plans through 2018 at an investor day in Auburn Hills, Michigan, is keeping open the possibility of raising funds with an equity-linked loan at a later date following a planned listing in New York, three of the people said. A Fiat representative declined to comment in advance of the presentation.

Fiat’s expansion will focus on rebuilding the Alfa Romeo brand, which became a cultural icon with the 1960s film “The Graduate,” with plans to develop a new line of rear-wheel-drive sedans and sport-utility vehicles, people familiar have said.

The models will begin hitting the market in 2016, and high-end versions will be equipped with motors developed by Ferrari, the Fiat-owned supercar maker, the people said. The relaunch will be boosted by selling cars through Jeep’s international dealer network, widening Alfa’s reach, they said.

The revival of Alfa Romeo is key to Marchionne’s plans for the merged carmaker. With allure stemming from classics like the iconic Duetto spider of the 1960s, Alfa has the potential to help drive profit for the group, in the same way that Audi does at VW, by commanding higher prices than mass-market models bearing the Chrysler, Dodge or Fiat badges.

Maserati Expansion

Maserati will also probably increase production and add the Alfieri sports car, shown this past March in Genena, to its lineup as part of an expansion already under way at that brand, people familiar with the matter said last month.

Fiat, which had 22.7 billion euros of available liquidity at the end of 2013, expects its debt to increase to as much as 10.3 billion euros at the end of the year after the acquisition of Chrysler.

Marchionne, 61, targets completing the merger of the Italian and U.S. carmakers by the end of 2014, he said in March. The new entity, named Fiat Chrysler Automobiles NV, will have its main stock listing in New York while it will be registered in the Netherlands with a fiscal domicile in the U.K. for tax purposes.

Delivery Target

Fiat started accumulating Chrysler stock in 2009 as part of a rescue of the U.S. carmaker following the global recession. Without the division, Fiat would have been unprofitable in 2012 and 2013 because of losses in Europe.

Marchionne has said previously that annual deliveries may exceed 6 million cars by 2018, compared with the 4.5 million to 4.6 million vehicles Fiat and Chrysler plan to sell in 2014. Wolfsburg, Germany-based VW, which overtook Detroit-based GM as the world’s second-biggest auto manufacturer last year, is targeting sales of more than 10 million cars and trucks in 2014. Toyota, the global car-industry leader, is forecasting deliveries of 10.32 million vehicles this year.

The program “will be beyond ambitious and accompanied by huge volume and profit targets, most notably the rebirth of Alfa Romeo but also a growth plan for Chrysler, a China plan for Jeep, a Brazil strategy and probably” a competitor to Renault SA’s budget Dacia cars, Max Warburton, a Sanford C. Bernstein Ltd. analyst in Singapore, wrote in a report to clients on May 2. “But will the market buy it?”

To contact the reporters on this story: Tommaso Ebhardt in Southfield, Michigan, at tebhardt@bloomberg.net; Mark Clothier in Southfield, Michigan, at mclothier@bloomberg.net

To contact the editors responsible for this story: Jamie Butters at jbutters@bloomberg.net; Chad Thomas at cthomas16@bloomberg.net Chad Thomas, Tom Lavell

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