Fiat Chrysler Debuts With A Thud on Wall Street; Will Investors Buy Its … – Forbes

Posted: Tuesday, October 14, 2014

Sergio Marchionne’s grand plan to merge Fiat and Chrysler into a powerful new global automaker finally came to fruition Sunday, five years after his Italian company snatched the struggling U.S. carmaker from bankruptcy as part of a government-brokered bailout.

But on its first day of trading on the New York Stock Exchange, investors were in no rush to buy stock in the new company, Fiat Chrysler Automobiles, amid continued skepticism over whether Marchionne’s ambitious growth targets are achievable. Trading opened at $9 a share under the symbol FCAU, and after a brief initial burst, ended the day down 0.89% at $8.92.

Marchionne, speaking on the floor of the NYSE, said he was disappointed by the market’s reaction. “I don’t think we should be given such a low grade,” he said, according to the Wall Street Journal.

The market’s muted response is no doubt related to the fact that investors have recently soured on both General Motors General Motors and Ford Motor Ford Motor, which last week lowered its earnings expectations because of headwinds in international markets. GM shares are down more than 19 percent in the past three months, and Ford shares are down more than 21 percent.

But there’s also plenty of skepticism about whether Marchionne can pull off his five-year, $60 billion growth plan, which includes a 60 percent global sales increase, to seven million vehicles, by 2018. The strategy includes expanding Jeep and Alfa Romeo worldwide and moving the Chrysler brand upscale. As Marchionne himself said back in May, when he outlined his plan, it requires “near-perfect execution.”

IHS IHS Automotive is among the industry experts that are doubtful. It expects sales of 5.1 million units by 2018, which would still be an 18.5% gain from 2013. “Although we envisage Chrysler/Lancia coming close to forecast sales and the Fiat and Fiat Professional/Ram brands making improvements, we feel other targets are going to be missed; particularly those for Jeep, Dodge and Alfa Romeo,” said IHS analyst Ian Fletcher.

Karl Brauer, a senior analyst at Kelley Blue Blook, said Marchionne has made substantial progress toward his vision, despite heavy skepticism back in 2009, but said many challenges remain. “He’s already positioned FCA to expand its global sales, revenue and profit. Now the market will decide how impressed they are with his efforts.”

The listing in New York (along with Milan) is a step toward widening the pool of investors Fiat Chrysler can tap to fund the $60 billion growth plan. At the NYSE Monday, Marchionne said the company intends to tap debt markets to raise capital and may look to sell equity to ensure it has extra cash to push through the market headwinds.

Fiat Chrysler calls London home for tax purposes, but its legal headquarters is in Amsterdam, and its operations are based in Detroit and Turin.

 

 

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