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Video: Marchionne Says Fiat Aims to Boost Efficiency in Italy

by on September 27, 2010

Sept. 27 (Bloomberg) — Fiat SpA Chief Executive Officer Sergio Marchionne talks about efforts to boost production at Italian factories and the outlook for partnerships with other automakers. He speaks with Bloomberg’s Flavia Rotondi in Rome.

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Video: Marchionne Says Fiat Aims to Boost Efficiency in Italy

Video: Virag Says Chrysler IPO May Not Get Attractive Pricing: Video

by on September 16, 2010

Sept. 16 (Bloomberg) — Dennis Virag, president of Automotive Consulting Group Inc., talks about Chrysler Group LLC Chief Executive Officer Sergio Marchionne’s remarks today that the automaker may hold an initial public offering in the second half of 2011. Virag, speaking with Betty Liu and Jon Erlichman on Bloomberg Television’s “In the Loop,” also discusses the prospects for an IPO by General Motors Co. (Source: Bloomberg)

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Video: Virag Says Chrysler IPO May Not Get Attractive Pricing: Video

Chrysler ADDS More Than 1,000 Jobs In Detroit

May 21, 2010

DETROIT — Chrysler Group LLC gave a big boost to the battered Michigan economy Friday when it announced plans to add about 1,100 workers to help build the new Jeep Grand Cherokee. The company made the announcement at a Detroit factory as it celebrated the start of Grand Cherokee production. Chrysler said it expects strong sales of the new sport utility vehicle, which is due in showrooms next month. Almost all the workers will be new hires, which Chrysler can pay about $14 per hour, about half the hourly rate received by current workers represented by the United Auto Workers union. The workers will staff a second shift at the factory, called the Jefferson North Assembly Plant, starting July 19. The announcement is good news for Michigan, which has the highest unemployment rate in the nation at 14 percent and has struggled for years with the decline of Detroit’s automakers. CEO Sergio Marchionne joined 1,400 current plant workers and a number of federal, state and local officials to celebrate the start of Grand Cherokee production. The new vehicle is more efficient and car-like than the current model, Chrysler said. Marchionne said the additional jobs show how confident he and other company executives are about the success of the Grand Cherokee. When asked whether the hirings are a gamble based on the state of the economy, Marchionne smiled and said: “Don’t be so skeptical. It’s a good day. Enjoy it.” Chrysler has only about 100 laid-off workers in the Detroit area who haven’t been recalled, so the company can take advantage of a provision in its contract with the UAW that gives newly hired workers much lower wages and benefits. Thousands of factory workers took buyout and early retirement offers when Chrysler ran into financial difficulties in 2008 and last year. The company eventually went through bankruptcy protection, cleansing it of burdensome debt. “This day will go down in history that Chrysler is indeed the comeback kid,” United Auto Workers Vice President General Holiefield said. At the celebration, Marchionne, who also heads Italy’s Fiat Group SpA, drove one of the new sport utility vehicles through the plant and to a stop in front of the stage. He and front-seat passenger Michigan Gov. Jennifer Granholm emerged from the SUV to applause from the workers. “We’re here to declare that Chrysler is back!” Granholm shouted. Chrysler Group LLC began making the Grand Cherokees in recent weeks, and Friday’s event served as the official launch. The start of production was eagerly awaited by Chrysler dealers, who have been without a totally new product since the Ram pickup came out late in 2008. Mike Andretta, owner of a Chrysler dealership in Beaver Springs, Pa., says he’s hoping the new vehicle will be a boost to his bottom line. “We’re surviving month-to-month. We need new product – quickly,” he said. “The old Grand Cherokee’s been kind of dead for the last two years now, so that market we don’t really get a lot of business in any more.” “Once the word gets out, I think it’s going to be a success,” Andretta said. “I don’t think any dealership will survive solely on the new Jeep Grand Cherokee, but it’ll help, and we need new stuff.” The jobs and new product celebration capped a busy week for Chrysler. On Thursday Marchionne said the company is considering a public stock offering sometime next year. Marchionne said there is enough demand in the marketplace to support initial public offerings for Chrysler and General Motors Co., both of which were restructured in government-funded bankruptcy protection cases last year. He also said Chrysler struggled through a painful restructuring last year, and he never wants to see the company lose money again, predicting that U.S. vehicle sales will top 11 million this year and 12 million in 2011. Sales slumped to 10.4 million last year, the worst in more than a quarter century. Chrysler would have been sold off in pieces in late 2008 or early 2009 if the U.S. government had not stepped in with billions in aid. The government put Marchionne in charge of turning around the Auburn Hills automaker and gave Fiat a 20 percent stake in the company. But on Friday, Marchionne was all smiles, talking about the “milestone launch” of the Jeep Grand Cherokee, a totally new version of the venerable SUV. The new model is more efficient than the old one, behaving more like a car than a truck on suburban highways. Yet it still has off-road capability, the company said. Governor Granholm was just happy to see jobs added in Michigan rather than southern states, where Asian and European automakers have set up factories. “It’s not made in some Southern cornfield plant,” she said. “It’s made right here.” ___ AP Auto Writer Tom Krisher in Detroit contributed to this report.

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Chrysler in Hibernation Means Marchionne May Have to Wait on Fiat Spinoff

March 11, 2010

By Sara Gay Forden March 11 (Bloomberg) — Fiat SpA , the Italian carmaker that helped Chrysler Group LLC emerge from bankruptcy, may wait to turn around the U.S. business before deciding on a share sale or spinoff for its automotive division. The Italian company’s stock has risen 19 percent this month on speculation that Chief Executive Officer Sergio Marchionne may carve out Fiat’s biggest unit as a new company. Fiat executives have so far sent mixed signals about whether an initial public offering of the division will take place. A separation of the auto manufacturing operations, which generated 56 percent of Fiat’s revenue last year, would give Marchionne an entity to facilitate future alliances, and a share sale would generate cash for international expansion . The maker of Puntos and Ferraris must show progress at Chrysler, of which it owns 20 percent, before convincing investors to buy shares in the unit, said Royal Bank of Scotland analyst Jose Asumendi . “Fiat has too much on its hands right now to think about a possible spinoff,” said London-based Asumendi, who advises holding Fiat’s stock. “The priority is to resurrect Chrysler, make it profitable and repay its government loans.” Fiat Automobile, not including Fiat’s 20 percent stake in Chrysler, is worth about 5.9 billion euros ($8 billion), or 53 percent of Fiat’s market value , said Stephen Pope , chief global equity strategist at Cantor Fitzgerald in London. “Get the U.S. strategy right and in six years time, Fiat Auto could be worth 20 percent more.” Holding Pattern Fiat derives the remainder of its revenue from units including truckmaker Iveco SpA and CNH Global NV , an agricultural and construction machinery maker. Marchionne plans to detail on April 21 in Turin, Italy, how Chrysler, which he also runs, will improve Fiat’s profitability through shared sales efforts and technology. The CEO is trying to shore up both companies as government incentives to buy new cars end in Europe and Chrysler’s U.S. market share lags a 10.5 percent target for 2010. Chrysler is “in a year of hibernation” and talk of a separate Fiat Auto is “premature,” Kristina Church , an analyst at Barclays Capital, wrote in a March 8 note. Barclays upgraded Fiat to “equal weight” from “underweight” in part because the shares may benefit from the speculation. Fiat’s surge this month is more than triple that of the Bloomberg World Auto Manufacturers Index , which includes Fiat and has risen 5.4 percent. Ford Motor Co., the only major U.S. carmaker that didn’t take a government bailout, has jumped sevenfold in 12 months and is up 28 percent since the beginning of the year, compared with a 10 percent decline by Fiat. Partial Sale That recent share gain might persuade executives to press ahead with a share sale sooner rather than later, said Pierre Bergeron , a credit analyst at Societe Generale SA in Paris. The company’s perceived value is unlikely to rise soon because Fiat and Chrysler offer a weak product lineup in a challenging U.S. market, he said. A partial sale or spinoff this year, of a 30 percent stake, could give Fiat additional options for consolidating its debt, Bergeron said. Fiat could also sell more after that, he said. A spinoff “is not dead,” Marchionne told reporters March 3 in Geneva. A day earlier, Chairman Luca Cordero di Montezemolo told Bloomberg News that he didn’t foresee a share sale. ‘Conjecture’ Responding to a request from Italy’s stock market regulator, Fiat said March 6 that media reports about an IPO or spinoff are “conjecture” and that it isn’t planning any “extraordinary transactions.” A company spokesman declined to comment further yesterday. Marchionne said last year that the creation of a separate auto company may take several years. Fiat will be held back this year by declining car sales, pricing pressure and industry overcapacity, Barclays’s Church wrote. Fiat makes about 2 million cars annually, while Chrysler manufactured 1.3 million last year. That’s short of Marchionne’s contention that to survive as a global automaker , a company needs production of at least 5 million vehicles. Last year, the carve-out speculation centered on Fiat’s bid for General Motors Co.’s Opel because a purchase could have given Fiat the scale Marchionne says is necessary to survive. GM eventually decided to keep the European operations. Marchionne needs to show success with current strategic plans before he considers creating one automotive group, analysts at Goldman Sachs Group Inc. led by Stefan Burgstaller said March 8 as they added Fiat to a “conviction buy” list. Dodge Chargers, 300s Fiat acquired the 20 percent stake in Auburn Hills, Michigan-based Chrysler in June as part of a plan to help the U.S. carmaker emerge from bankruptcy. The Italian company can lift the holding to 35 percent in increments by meeting targets such as building an engine in the U.S., and can win control after government loans are repaid. Chrysler is refreshing most models, including the Jeep Grand Cherokee. New Chrysler 300s and Dodge Chargers will use the first platform developed jointly with Fiat, which plans to begin selling its 500 subcompact in the U.S. in early 2011. Marchionne has said Chrysler may have an IPO after 2010. Tesla Motors Inc., the Palo Alto, California-based producer of a $109,000 electric Roadster, filed in January for an initial public offering to raise as much as $100 million. Detroit-based GM, which emerged from bankruptcy July 10, could hold an IPO by late 2010, Chairman Ed Whitacre has said. Fiat may have earnings before interest, taxes, depreciation and amortization of 4.26 billion euros this year, a 14 percent increase from 2009, according to the average estimate of 26 analysts surveyed by Bloomberg. Chrysler had Ebitda of $200 million in 2009’s third quarter and posted a sales gain in February, its first in 26 months. Bondholders One hurdle to a separate Fiat Auto is how the carmaker will apportion its bonds, according to Alessandro Frigerio , a fund manager at RMJ Sgr, which oversees about 100 million euros and owns Fiat shares. Fiat’s bonds totaled 11.4 billion euros at the end of 2009, according to its annual report . “It’s a complicated transaction that has to satisfy both the bondholders and the shareholders,” Frigerio said. “The transaction is also very much tied to how things go at Chrysler, which is still in the preliminary stages of the restructuring.” To contact the reporter on this story: Sara Gay Forden in Milan at sforden@bloomberg.net

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Fiat May Need to Convince on Chrysler Before Seeking Automotive Unit IPO

March 11, 2010

By Sara Gay Forden March 11 (Bloomberg) — Fiat SpA , the Italian carmaker that helped Chrysler Group LLC emerge from bankruptcy, may wait to turn around the U.S. business before deciding on a share sale or spinoff for its automotive division. The Italian company’s stock has risen 19 percent this month on speculation that Chief Executive Officer Sergio Marchionne may carve out Fiat’s biggest unit as a new company. Fiat executives have so far sent mixed signals about whether an initial public offering of the division will take place. A separation of the auto manufacturing operations, which generated 56 percent of Fiat’s revenue last year, would give Marchionne an entity to facilitate future alliances, and a share sale would generate cash for international expansion . The maker of Puntos and Ferraris must show progress at Chrysler, of which it owns 20 percent, before convincing investors to buy shares in the unit, said Royal Bank of Scotland analyst Jose Asumendi . “Fiat has too much on its hands right now to think about a possible spinoff,” said London-based Asumendi, who advises holding Fiat’s stock. “The priority is to resurrect Chrysler, make it profitable and repay its government loans.” Fiat Automobile, not including Fiat’s 20 percent stake in Chrysler, is worth about 5.9 billion euros ($8 billion), or 53 percent of Fiat’s market value , said Stephen Pope , chief global equity strategist at Cantor Fitzgerald in London. “Get the U.S. strategy right and in six years time, Fiat Auto could be worth 20 percent more.” Holding Pattern Fiat derives the remainder of its revenue from units including truckmaker Iveco SpA and CNH Global NV , an agricultural and construction machinery maker. Marchionne plans to detail on April 21 in Turin, Italy, how Chrysler, which he also runs, will improve Fiat’s profitability through shared sales efforts and technology. The CEO is trying to shore up both companies as government incentives to buy new cars end in Europe and Chrysler’s U.S. market share lags a 10.5 percent target for 2010. Chrysler is “in a year of hibernation” and talk of a separate Fiat Auto is “premature,” Kristina Church , an analyst at Barclays Capital, wrote in a March 8 note. Barclays upgraded Fiat to “equal weight” from “underweight” in part because the shares may benefit from the speculation. Fiat’s surge this month is more than triple that of the Bloomberg World Auto Manufacturers Index , which includes Fiat and has risen 5.4 percent. Ford Motor Co., the only major U.S. carmaker that didn’t take a government bailout, has jumped sevenfold in 12 months and is up 28 percent since the beginning of the year, compared with a 10 percent decline by Fiat. Partial Sale That recent share gain might persuade executives to press ahead with a share sale sooner rather than later, said Pierre Bergeron , a credit analyst at Societe Generale SA in Paris. The company’s perceived value is unlikely to rise soon because Fiat and Chrysler offer a weak product lineup in a challenging U.S. market, he said. A partial sale or spinoff this year, of a 30 percent stake, could give Fiat additional options for consolidating its debt, Bergeron said. Fiat could also sell more after that, he said. A spinoff “is not dead,” Marchionne told reporters March 3 in Geneva. A day earlier, Chairman Luca Cordero di Montezemolo told Bloomberg News that he didn’t foresee a share sale. ‘Conjecture’ Responding to a request from Italy’s stock market regulator, Fiat said March 6 that media reports about an IPO or spinoff are “conjecture” and that it isn’t planning any “extraordinary transactions.” A company spokesman declined to comment further yesterday. Marchionne said last year that the creation of a separate auto company may take several years. Fiat will be held back this year by declining car sales, pricing pressure and industry overcapacity, Barclays’s Church wrote. Fiat makes about 2 million cars annually, while Chrysler manufactured 1.3 million last year. That’s short of Marchionne’s contention that to survive as a global automaker , a company needs production of at least 5 million vehicles. Last year, the carve-out speculation centered on Fiat’s bid for General Motors Co.’s Opel because a purchase could have given Fiat the scale Marchionne says is necessary to survive. GM eventually decided to keep the European operations. Marchionne needs to show success with current strategic plans before he considers creating one automotive group, analysts at Goldman Sachs Group Inc. led by Stefan Burgstaller said March 8 as they added Fiat to a “conviction buy” list. Dodge Chargers, 300s Fiat acquired the 20 percent stake in Auburn Hills, Michigan-based Chrysler in June as part of a plan to help the U.S. carmaker emerge from bankruptcy. The Italian company can lift the holding to 35 percent in increments by meeting targets such as building an engine in the U.S., and can win control after government loans are repaid. Chrysler is refreshing most models, including the Jeep Grand Cherokee. New Chrysler 300s and Dodge Chargers will use the first platform developed jointly with Fiat, which plans to begin selling its 500 subcompact in the U.S. in early 2011. Marchionne has said Chrysler may have an IPO after 2010. Tesla Motors Inc., the Palo Alto, California-based producer of a $109,000 electric Roadster, filed in January for an initial public offering to raise as much as $100 million. Detroit-based GM, which emerged from bankruptcy July 10, could hold an IPO by late 2010, Chairman Ed Whitacre has said. Fiat may have earnings before interest, taxes, depreciation and amortization of 4.26 billion euros this year, a 14 percent increase from 2009, according to the average estimate of 26 analysts surveyed by Bloomberg. Chrysler had Ebitda of $200 million in 2009’s third quarter and posted a sales gain in February, its first in 26 months. Bondholders One hurdle to a separate Fiat Auto is how the carmaker will apportion its bonds, according to Alessandro Frigerio , a fund manager at RMJ Sgr, which oversees about 100 million euros and owns Fiat shares. Fiat’s bonds totaled 11.4 billion euros at the end of 2009, according to its annual report . “It’s a complicated transaction that has to satisfy both the bondholders and the shareholders,” Frigerio said. “The transaction is also very much tied to how things go at Chrysler, which is still in the preliminary stages of the restructuring.” To contact the reporter on this story: Sara Gay Forden in Milan at sforden@bloomberg.net

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Altavilla’s Race to Fix Chrysler May Make Him Marchionne Successor at Fiat

January 21, 2010

By Sara Gay Forden Jan. 22 (Bloomberg) — Fiat SpA’s Alfredo Altavilla spends at least as much time in Michigan as Italy these days, darting off to a factory outside Detroit to oversee progress in building the engine that’s vital to making the Chrysler Group LLC partnership run. If the 46-year-old Italian delivers with the fuel- efficient 1.4-liter engine, it will not only be a milestone to rolling out Fiat’s first car in the U.S. since 1983. The accomplishment may cement his ascension to be Chief Executive Officer Sergio Marchionne’s successor, industry consultants and analysts said. As Marchionne, 57, weighs when to split his dual roles running Chrysler and Fiat, the top job at the Fiat Auto division is Altavilla’s to lose. Reviving Chrysler is the Italian carmaker’s key to survival after demand plummeted in the recession, the CEO says. Altavilla, who runs the powertrain engine unit and joined the Chrysler board in June after Fiat got a 20 percent stake, is leading an effort to share technology and reduce costs. “Altavilla is the most likely candidate to run Fiat’s automotive business,” said Marco Santino , a consultant at A.T. Kearney in Rome, which has worked for Fiat on supply- chain operations. “The powertrain division is the nerve center of the business.” In 20 years at the maker of Puntos and Pandas, Altavilla has led partnerships from India to Russia. He overhauled Fiat’s powertrain unit, overseeing the development of energy- saving engines and transmissions. Chrysler IPO Helping his boss fix Chrysler is his biggest challenge yet. Altavilla was in the U.S. last week for a board meeting and the North American International Auto Show. He is back in Italy ahead of Fiat’s earnings announcement on Jan. 25. Marchionne said in December that each automaker will need its own leader within two years. He hasn’t revealed a succession plan. The CEO will likely stay at Chrysler through an initial public offering in order to gain banks’ confidence, two people familiar with the situation said. Marchionne says an IPO won’t occur before 2011. His other choices may include Harald Wester , chief technology officer at Fiat and head of Maserati, and Richard Palmer , sent from Fiat to Chrysler as chief financial officer. Marchionne hasn’t looked outside the company for major hires since becoming CEO in 2004, two people close to Marchionne said. Altavilla is the only Fiat executive on Chrysler’s board besides Marchionne. ‘Best Position’ “We haven’t made up our mind, and I certainly haven’t about the exact timing,” Marchionne said last month. Altavilla, who also leads new business development, declined to be interviewed for this story. “Altavilla is in the best position to exploit Fiat Group’s technological strengths through new business opportunities,” said Giorgio Elefante , a consultant at PriceWaterhouseCoopers’ Automotive Institute in Italy who has worked with Fiat on production plans. Altavilla, from the port town of Taranto, where his father owned a Lancia dealership, joined Fiat in 1990 to manage product development, international ventures and strategic planning. He ran the Beijing office and helped integrate Indian operations after Fiat bought out a licensee. He has led business development since 2001 and in 2002 took over parts of a venture with General Motors Corp. , primarily supplying engines for Opels and Saabs. Fiat negotiated a $2 billion payoff from GM for ending the partnership. Turkish Success Marchionne added all alliances to Altavilla’s purview and sent him to Turkey to oversee models for emerging markets, including a van built with PSA Peugeot Citroen . By boosting output in a country with cheaper labor, Altavilla helped Fiat increase earnings. Marchionne then created the $10 billion-a-year powertrain division and put Altavilla in charge of reorganizing it. Operating profit more than doubled in the first full year after he took charge, according to Fiat reports. He now oversees technology for Multi Air engines, which reduce emissions. Altavilla has had misfires, including Fiat’s bid for GM’s Opel, for which he assisted Marchionne. The offer was rejected and GM settled on another bidder, then decided to keep Opel. Two Chinese accords failed on Altavilla’s watch, and Fiat reached an agreement last year to work with Guangzhou Automobile Group Co. A Few Miscues “It does raise the question of whether he’s negotiating in the right manner,” said Stephen Pope , an analyst at Cantor Fitzgerald in London. “What worked well for him in his own backyard may not work as well in those countries.” Altavilla has an otherwise “impeccable record” and the Asian misfires were “not necessarily his fault,” Pope said. The executive’s successes include manufacturing cars with Severstal in Russia, building the Ford Ka in Poland and producing diesel engines with Japan’s Suzuki. Altavilla’s detail-focused style would be a switch from Marchionne, who boosts morale by joking and laughing with janitors and managers alike and asks employees how their kids are doing. While Marchionne dresses casually in slouchy trousers, Altavilla wears suits and is more formal. Altavilla emulates Marchionne’s 24/7 pace at Fiat. Outside work, he’s a Harley-Davidson enthusiast and also has competed in Italy’s Mille Miglia antique car race. Managing Engineers Though he’s an economics graduate, Altavilla effectively manages engineers, according to colleagues. “He understands both business development and automotive operations without being either a banker or an engineer,” said Galeazzo Scarampi , former vice president of the Agnelli family holding company that controls Fiat . “He helped Marchionne bring in a new mentality to Fiat, enabling him to run it more effectively with fewer layers of management,” Scarampi said. Fiat was regarded as rule-bound and resistant to change before Marchionne was hired. Fiat’s Chrysler holding will jump to 25 percent this year when U.S. production begins on the Fiat-derived engine, according to the sale agreement. Other milestones include selling a car in the U.S. that gets at least 40 miles per gallon and expanding Chrysler exports. Fiat can buy a majority stake after repaying government loans. “In November 2006, Marchionne said he was ready to leave Fiat Auto and he’s still there,” said Pierre Bergeron , a credit analyst at Societe Generale SA in Paris. “The real question is whether he’s ready to leave the position or not.” To contact the reporter on this story: Sara Gay Forden in Milan at sforden@bloomberg.net .

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Chrysler’s Press Plans to Leave Automaker Soon to Pursue Other Interests

August 21, 2009

By Mike Ramsey Aug. 21 (Bloomberg) — Chrysler Group LLC Deputy Chief Executive Officer Jim Press , who joined the U.S. automaker two years ago from Toyota Motor Corp., will leave the company soon, three people familiar with his plans said. Press, 62, is departing to pursue other interests, said the people said, who didn’t elaborate and didn’t want to be identified because the decision isn’t public. One of the people said Press plans to leave by late November or early December. Chrysler in an e-mailed statement declined to comment. Chrysler Group is run by Fiat SpA after exiting bankruptcy in June. Press has no one reporting to him and has been assisting Chief Executive Officer Sergio Marchionne with the management transition, the people said. Press serves as a special adviser to Marchionne, who is also CEO of Fiat. Chrysler hired Press as president in September 2007, a month after Cerberus Capital Management LP bought the Auburn Hill, Michigan-based company from Daimler AG. Press would be the last of the former Chrysler LLC’s three top executives to leave the revamped company, which emerged from Chapter 11 protection under a U.S. government-sponsored plan. Press didn’t immediately respond to messages left on his voice mail or interview requests made through Chrysler. Before the bankruptcy reorganization, Press and Tom LaSorda were presidents of the automaker and Robert Nardelli was CEO. LaSorda retired in May and Nardelli resigned in June. The Wall Street Journal reported earlier today that Press would leave by the end of the year, citing three people told of the plan. To contact the reporter on this story: Mike Ramsey in Southfield, Michigan, at mramsey6@bloomberg.net

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