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| Marchionne has dual task of reviving Chrysler, keeping Fiat fit |
| Bloomberg / Milan Jun 12, 2009, 00:48 IST |
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Fiat SpA Chief Executive Officer Sergio Marchionne, who won his six-month battle to gain control of Chrysler LLC, has yet to prove he can rebuild the US carmaker without losing sight of his original challenge: bolstering Fiat’s finances.
The 56-year-old Fiat CEO is assuming the same role at Chrysler after the Turin, Italy-based carmaker and its partners on Wednesday bought most of Chrysler’s assets, creating the world’s sixth-largest auto producer. His first move was to reshuffle the US company’s leadership around its Chrysler, Jeep and Dodge brands, emulating a similar move he carried out at Fiat when he arrived in 2004.
Chrysler is losing as much as $100 million a day, global car demand is withering amid the biggest recession since World War II, and Marchionne needs to refinance about ¤4.5 billion ($6.3 billion) of Fiat debt coming due this year. “Sergio Marchionne is at the top dealing with it all and there’s a lot to do,” said John Buckland, automotive analyst at MF Global Securities in London who has a “sell” rating on Fiat shares. “Fiat has to deliver platforms and technology and organize things so it can sell Chrysler cars and Fiat cars.” Marchionne, seeking to trim Fiat’s ¤6.6 billion of net debt, has insisted the Italian automaker won’t inject cash into the newly formed Chrysler Group LLC. Fiat is providing technology such as engines and vehicle designs and will own an initial 20 per cent of Chrysler Group. Fiat, which is controlled by Italy’s Agnelli family, will have management control as well as three of nine board seats.
Jim Press, who had been one of two presidents of Chrysler LLC, was named deputy CEO. He will also be a special adviser to Marchionne. The carmaker confirmed its goal for earnings before interest, taxes and some items of more than ¤1 billion this year. Sales slumped 25 per cent to ¤11.27 billion in the first three months of this year. Sales in Fiat’s home market, its biggest, fell for a second month in May, posting an 8.6 per cent decrease and bringing the decline this year to 15 per cent. However, Fiat gained market share against rivals including Renault SAand Bayerische Motoren Werke AG, helped by government incentives to trade in older cars and as consumers pinched by the economic crisis traded down to smaller, less-expensive models such as the Panda and the Punto. Moody’s Investors Service estimates that global auto sales will fall 13 per cent this year, with the US leading with a 24 per cent drop. Vehicle registrations in Western Europe will drop 11 per cent, according to the ratings firm’s forecasts.
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