FCA considers Alfa Romeo, Maserati spin out as Great Wall Jeep plans fade

24 August 2017

Fiat Chrysler Automobiles (FCA) is considering options to improve its potential for investment and build on its value, with the possibility of spinning out its Maserati and Alfa Romeo brands into a separate company being discussed.

The move would focus the Italian vehicle manufacturer on the production of mass market cars, which would make the company more attractive to partners, including competitor companies. The move could also see FCA’s component brands, such as Magneti Marelli, become separate entities as well. The spun-out brands could be worth as much as €7 billion, while the parts division may be valued up to €5 billion.

However, FCA will retain the Jeep brand, which is considered its most valuable asset. Following recent speculation over the sale of the off-road brand to Chinese company Great Wall, analysts suggested the manufacturer was worth more than the rest of FCA’s brands combined. This would also mean the company would keep control of its associated Dodge and Ram brands, as well as the core Fiat and Chrysler companies.

The move will help the overall value of FCA increase across its remaining brands, and will unlock value for the Agnelli family and other shareholders, as the company continues to underperform.

FCA realises that it is struggling, especially as, according to Daimler CEO Dieter Zetsche, the company is one of the few remaining standalone brands in Europe, if not the world, especially following the sale of Opel to PSA Group. FCA chief executive Sergio Marchionne, a long-time proponent of consolidation, says that growing scale is ′crucial’ for European carmakers to compete against US counterparts.

Speaking in March 2017, Marchionne said: ′[Without scale,] we’re going to end up delivering incredibly poor margins or returns on this business,’ tackling what he sees as the industry’s continued needless duplication of investment. 

Marchionne is preparing his final five-year business plan before he leaves the carmaker in 2019. Separating parts of the group is a familiar tool for the executive. The company spun off truck and tractor maker CNH Industrial NV in 2011 and supercar brand Ferrari in 2016. Combined, the entities now have a market value of $57 billion, compared to about $6 billion in 2004, when Marchionne took charge.

A breakup strategy carries sizable risks, and Fiat is evaluating those, the people said. Alfa Romeo is in the early stages of its push to become a global luxury car brand and still needs billions of euros in investment to develop new models to compete with the likes of the BMW and Mercedes-Benz brands. And neither Maserati nor Alfa Romeo have the allure of the Ferrari marque. To offset these hurdles, Fiat may look to secure a partner for its upscale brands.

Meanwhile, Great Wall, Jeep’s potential suitor, has denied plans to acquire the manufacturer. Following its announcement on 21 August that it was looking to buy Jeep, or possibly FCA as a whole, analysts poured scorn on the potential of China’s seventh-largest manufacturer, highlighting that its total €13.5 billion value is under that of Jeep, and therefore it may not be able to sustain ideas of a purchase.

In a statement, Great Wall said: ′The company has not built any relationship with the directors of FCA nor has the company entered into any discussion or signed any agreements with any officer of FCA so far.’

As Jeep is the jewel in FCA’s crown, it was always unlikely that the Italian manufacturer group would sell the brand on its own.

Photograph courtesy of FCA