Fiat Separates Auto, Industrial Units; Explains Five-Year Plan
TURIN, Italy — While Fiat's automobile operations are being kept under the more than century old company, its industrial business units, meanwhile, are being placed into a demerged company, it was announced Wednesday as Fiat Group presented its five-year business plan
Fiat also aims to fully integrate its lineup with Chrysler Group, and has its sights set on selling 6 million units worldwide (combined with the Big 3 automaker) by 2014.
It has been a busy week for the Italian automaker, which also noted that Fiat Group recorded a first-quarter loss of Euro 21 million (compared to a loss of Euro 411 million in the year-ago period), with net revenues that climbed 14.7 percent to Euro 12.926 billion.
Chairman Luca Cordero di Montezemolo stepped down from his post Tuesday, and John Elkann took the helm amid rumors that Fiat's auto operations would be separated from its other business activities.
Fiat had been keeping quiet about the supposed plans, but a demerger was confirmed and explained in further detail Wednesday.
Basically, there will be a demerger of the industrial units from Fiat SpA, as the CNH, Iveco and FPT Industrial & Marine activities will be owned by the new demerged company, Fiat Industrial SpA.
Fiat SpA would then include Fiat Auto and the auto-related segments, and this process will likely be wrapped up by year's end.
So what are the benefits of the demerger?
Executives contend that Fiat Group gets "a global competitive pure play automotive OEM" in Fiat, as well as a "global player in the capital goods sector" in Fiat Industrial.
Furthermore, both Fiat and Fiat Industrial can benefit from "improved strategic flexibility to pursue growth/consolidation opportunities."
"There is no longer any reason to keep together two sectors that operate from such diverse industrial and financial logic," chief executive officer Sergio Marchionne was quoted as saying in various reports. "The existing structure no longer serves any useful purpose."
Fiat's Auto Goals
Looking at the five-year plan of Fiat Group Automobiles in more detail, one of the plan's six pillars is for there to be "optimal allocation of production between FGA and Chrysler Group."
Executives aim to maximize the production capacity of both automaker without having to make "brick and mortar" investments. FGA also hopes to enhance the manufacturing mix at its European plants, and said it will achieve this by including roughly 400,000 D+ segment cars.
There are also plans to fully integrate the vehicle lineups of Fiat and Chrysler Group.
Specifically, Jeep will be marketed globally, while the Chrysler brand would be integrated into the Lancia nameplate. Dodge will stand alone as an American performance brand with some of its vehicles eventually being brought into the Fiat brand.
Fiat also touched on expanding its European dealer network, which it plans to expand by more 1,600 stores or roughly 30 percent by 2014.
Of the more than 1,600 added points of sale, 950 would be from Chrysler's network.
Also included in its dealer plans are to capitalize on "opportunities through integration of sale and service activities of Chrysler, Jeep and Dodge branded products in several countries," something it started this month.
"Fiat Group Automobiles S.p.A. and Chrysler Group LLC took an additional step towards integrating their distribution activities in Europe," executives explained in Fiat Group first quarter earnings report. "Starting from April 2010, FGA will commence commercial activities to support the sale and service of Chrysler, Jeep and Dodge branded products in several countries in Europe.
"The activities and employees of the Chrysler national sales companies in Europe will be gradually transferred to the corresponding FGA national sales companies," they further noted. "FGA Capital is already provider of financial services for Chrysler's European activities"
The automaker also aims to bolster its dealer network sustainability, and by 2014 it hopes to have an average throughput of roughly 750 units, which would be an increase of more than 25 percent from last year.
Another goal is to establish new flagship stores in metropolitan areas, bringing its owned dealership count to more than 90 by 2014, which would mean opening more than 40 outlets compared to 2009.
Delving more into the FGA and Chrysler integration, by 2014, the company aims to have combined FGA/Chrysler sales volume total 6 million units.
The automakers also plan to collaborate in development international expansion opportunities.
With the commitments between Chrysler and FGA along with the resource sharing, the company contends in its plan that it can enjoy the benefits of optimal capital allotment, maximizing distribution capabilities, full leverage of technology across product range and purchasing power of Euro 60 billion in 2014.