Fiat Chrysler to spin off Ferrari into separate unit

[thumper]

BBC News - Fiat Chrysler to spin off Ferrari into separate unit

Fiat Chrysler Automobiles (FCA) plans to spin off Ferrari and sell a 10% stake in the luxury carmaker on the stock market.




The remaining Ferrari shares would be distributed among FCA shareholders.

The carmaker wants to complete the spin-off next year, with Ferrari shares listed in the US and possibly having a European listing too.

The sale is part of a bigger plan by FCA to raise €48bn ($61bn; £38bn) to fund an investment plan.

Fiat Chrysler chief executive Sergio Marchionne said it was "proper that we pursue separate paths for FCA and Ferrari" following the completion of the merger of Chrysler and Fiat.

The combined firm listed on the New York Stock Exchange on 12 October.

Since then there has been management upheaval at Ferrari.

President Luca di Montezemolo left the company after a public spat over strategy with Mr Marchionne.

Mr Marchionne had been a vocal critic of the on-track performance of Ferrari's Formula One team, particularly its lack of world titles since 2007. He has pledged to get the team back to winning ways.

Rescue deal
Earlier this month, he described the merger between Fiat and Chrysler as "the end of a long historical cycle".

That merger began when Chrysler filed for Chapter 11 bankruptcy protection in April 2009.

Chrysler had agreed a deal with its creditors including JP Morgan, Citigroup and Goldman Sachs, brokered by the US Treasury and Obama administration, to write off two-thirds of the car manufacturer's debt.

But a group of hedge and investment funds refused to accept the last-minute debt-for-equity package, which would have seen Chrysler's $6.9bn (£4.6bn) debt cancelled in return for a cash payment of $2bn.

When it emerged from bankruptcy later that year, Fiat owned 35% of the company, alongside the United Auto Workers pension fund on 41.5% and the US and Canadian governments owning the remainder.

Over the last five years, Fiat has bought out Chrysler's other owners, buying the final tranche of the car manufacturer from the United Auto Workers pension fund in January.

A Ferrari spin-off had long been anticipated by industry experts as Mr Marchionne seeks to maximise values from the group's various brands.

Profit
There are no plans to spin off FCA's other luxury brands, including Alfa Romeo and Maserati, it said.

The announcement of the Ferrari spin-off comes as FCA said it returned to profit in the third quarter on a strong rise in sales of its luxury brands, as well as revenue gains in North America and Asia.

FCA reported a net profit of €174m for the three months to the end of September, compared with €15m a year earlier.

Revenues were 14% higher at €23.5bn. Luxury brand sales increased 35% overall, while North America saw a 20% rise in revenues and sales in Asia rose 30%. Both markets helped offset a 12% fall in revenue in a weak Latin American market.

line
Analysis: Theo Leggett, BBC business correspondent
Ferrari has effectively been controlled by Fiat since 1969 - although the Ferrari family continued to run the F1 team until 1988.

The two companies have been intrinsically linked, with Ferrari providing the cachet and snob value, while Fiat had the engineering and financial muscle.

But Fiat itself is now undergoing momentous change.

Following the merger with Chrysler, it has embarked on an ambitious and very costly expansion plan.

It needs money, and the spin off of Ferrari is all about unlocking value.

The sale of a 10% stake on the stock market will allow Fiat to cash in on its investment - while ensuring enough of the company remains in Italian hands to head off any political protests about an Italian icon potentially falling into foreign hands.

[RE-Jo]

I feel stupid to ask... but what does this mean in terms of future of Ferrari?

Thanks for clarifying.

[Hehe]

Originally Posted by RE-Jo

I feel stupid to ask... but what does this mean in terms of future of Ferrari?

Thanks for clarifying.

It can be both good and bad.

Good:
Ferrari is a high prestigious brand. By becoming a fully independent company, it can focus more on what it wants to do rather than following the general guideline from its parent company.

Bad:
Fiat was all $$$ and a company much larger in scale. This has allowed Ferrari to have access to have an economy of scale to its suppliers while being a minor manufacturer. Without having Fiat behind, their parts and other stuff might become more expensive for them given their quantity. Furthermore, depending on how well the new Ferrari is going to manage its finances, losing Fiat as its source of fund could prove that Ferrari will take longer to introduce new platforms as they are usually costly to develop and deploy.

[bomiheko]

Another result of this would be that Ferrari might dilute its brand more. AFAIK, european automakers have to meet emissions targets, but Ferrari's spew out high CO2. As Ferrari was part of Fiat, their results were averaged with them. Now, Ferrari might have to come up with an all electric plug in car kinda like how Aston Martin had the cygnet.

[Klondike]

I think that's part of the reason why Fiat separated Ferrari from themselves. It's an easy way to meet stringent http://en.wikipedia.org/wiki/European_emission_standards