FCA Eyes Consolidation, Spinning Off Maserati

 Fiat Chrysler Automobiles (FCA) Building With Logo

Aug 25, 2017

In an attempt to eliminate debt and increase the value of their combined brands, Fiat Chrysler Automobiles (FCA) is considering consolidating some operations and spinning off their upscale Maserati and Alfa Romeo brands. The moves could bring about a greater potential to capitalize on the larger, more lucrative automotive mass market.

This could also open new doors to mergers or joint ventures that leverage FCA’s automotive technology. Currently, the company’s operations are valued at approximately $8.3 billion. 

Some of the business units that could be spun-off include the castings operation Teksid and the industrial robotics company Comau. Decisions are not expected until early next year, but the ripple effect through the industry could be significant. If the business units are separated, their aggregate value could roughly double, allowing shareholders to cash in and new capital to be infused throughout all these companies.

Chief Executive Officer Sergio Marchionne has seen the benefits of such a process. He previously led the process of spinning off tractor maker CNH Industrial in 2011 and Ferrari in 2016. Combined, these individual entities have seen their market value grow by nearly 10-fold since 2004.

It’s rumored that FCA would keep the Jeep, Dodge, and Ram brands as anchors for the general automotive business. This is despite recent interest from China’s Great Wall Motor Company, which stated that Jeep could be an acquisition target.

Although the increased market value could provide an infusion of financial resources, FCA will need to guard against potential damage to the brands. In particular, Alfa Romeo is in the early stages of a push to increase its global footprint to compete with BMW and Mercedes-Benz. Similarly, there’s juggling the unique elements of the Maserati brand as it looks to compete with the now independent Ferrari.

Part of the dynamic pushing these spin-offs and gravitating more strongly towards the mass market is a debt total nearing $5 billion. FCA would like to have this eliminated by the end of 2018, when Marchionne will step down from his CEO post.