Fiat Chrysler Set for Parts-Unit Separation as Big Deal on Hold – Bloomberg

Fiat Chrysler Automobiles NV, lacking a potential deal to combine with another carmaker anytime soon, will push ahead with separating from its components business, Chief Executive Officer Sergio Marchionne said.

Marchionne, who has actively sought a partner for Fiat Chrysler in the past, cooled speculation of a pending deal to tie up with a competitor, saying he hadn’t received any approach or offer for the Italian-American automaker. He also said that the upscale Alfa Romeo and Maserati brands aren’t ready to be independent. That puts the near-term focus on smaller portfolio adjustments. Fiat Chrysler stock dropped the most in two months.

“There are some activities at the component businesses which don’t belong,” Marchionne told Bloomberg News on Saturday in Monza, Italy. “The group must be purified from those assets.

Sergio Marchionne

Marchionne, 65, is preparing his final five-year business plan before he leaves Fiat Chrysler in the first half of 2019. He acknowledged that deeper changes might be coming when he said in July that the carmaker will evaluate whether to spin off some businesses. The company is pushing to eliminate 4.2 billion euros ($5 billion) in debt by the end of next year as part of plans to make at least 4.7 billion euros of adjusted net income.

Spinning off the components operation could reduce Fiat Chrysler’s net debt by 38 percent, even as it reduces adjusted operating profit by 8 percent, “further strengthening the company’s financial-risk profile,” Joel Levington, a senior credit analyst at Bloomberg Intelligence, wrote in a report Sunday.

Marchionne didn’t exclude Fiat Chrysler eventually starting talks on a tie-up before he leaves the helm. “It is difficult to make forecasts for the next two years,” he said. “What is important is our 2018 plan, and results are coming.”

Fiat Chrysler shares dropped as much as 3.6 percent, the steepest intraday decline since June 29, and were down 1.3 percent at 13.17 euros as of 9:37 a.m. in Milan trading.

The CEO has long been a vocal proponent of carmakers’ consolidation, arguing that the industry wastes money by developing multiple versions of the same technology. Those pressures have only intensified as countries such as the U.K. and France set deadlines to eliminate combustion engines, while self-driving technologies and ride-hailing services threaten to upend auto manufacturers’ traditional business model.

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