Marchionne's Grand Vision For FCA Faces Hard Financial Road To Success
Though Fiat Chrysler Automobiles CEO Sergio Marchionne’s five-year plan announced this week may be ambitious, analysts are raising questions about how the plan will be funded — and how much will be needed — if it is to be successful, let alone live up to Marchionne’s vision.
Automotive News Europe reports a large part of the problem for the plan, according to Bernstein Research analyst Max Warburton, is debt:
Much as we admire the ambition and think elements are achievable… it is hard to find conviction on the financing of the plan. Fiat is weighed down with huge debt, burdened by financing costs and is only thinly profitable. It’s (sic) cost of capital is huge.
Warburton adds FCA’s grand plan and its potential capital expenditure and R&D appear to be unaffordable and not prudent for investors, stating the company would need “a capital raise” for any part of the plan to pan out.
Aside from its debt, FCA also faces sales challenges from markets that are peaking or slowing down, with the European market being the biggest drag upon the automaker. However, independent analyst Marianne Keller said that with the recovery now taking place in Europe, paired with North American profits and a strong Jeep brand, Marchionne could “pull it off”; Marchionne himself announced during the five-year plan’s unveiling that he was considering a mandatory convertible bond to bring the needed financing for the plan.
Finally, FCA’s Q1 2014 results — a net loss of 319 million euros compared to a net profit of 31 million euros the year before — serve as a sign for both the company and its investors that FCA has more hard road ahead, a view best summed up by Macquarie Group analyst Jens Schattner:
If it was so easy just to launch new products to be successful in this industry, why wouldn’t everybody do exactly the same.
Seattle-based writer, blogger, and photographer for many a publication. Born in Louisville. Raised in Kansas. Where I lay my head is home.
More by Cameron Aubernon
Latest Car Reviews
Read moreLatest Product Reviews
Read moreRecent Comments
- Turbo Is Black Magic My wife had one of these back in 06, did a ton of work to it… supercharger, full exhaust, full suspension.. it was a blast to drive even though it was still hilariously slow. Great for drive in nights, open the hatch fold the seats flat and just relax.Also this thing is a great example of how far we have come in crash safety even since just 2005… go look at these old crash tests now and I cringe at what a modern electric tank would do to this thing.
- MaintenanceCosts Whenever the topic of the xB comes up…Me: "The style is fun. The combination of the box shape and the aggressive detailing is very JDM."Wife: "Those are ghetto."Me: "They're smaller than a Corolla outside and have the space of a RAV4 inside."Wife: "Those are ghetto."Me: "They're kind of fun to drive with a stick."Wife: "Those are ghetto."It's one of a few cars (including its fellow box, the Ford Flex) on which we will just never see eye to eye.
- Oberkanone The alternative is a more expensive SUV. Yes, it will be missed.
- Ajla I did like this one.
- Zerofoo No, I won't miss this Chevrolet Malibu. It's a completely forgettable car. Who in their right mind would choose this over a V8 powered charger at the rental counter? Even the V6 charger is a far better drive.
Comments
Join the conversation
Is it nasty for me to say that I hope FCA succeeds if only because it will cause "Sweet Pete" DeLorenzo to choke on his own bile?
I'm onboard with Sergio. If you want a small insight into what his thought processes are, and his dedication and work ethic is, watch a 60 Minutes segment about him from about two years ago. I think I work hard, but Sergio would wear me out, even though I can't think of a boss who would be more exciting to help build a company with.