FCA plans to spin off parts division by end of 2018

5 April 2018

In order to focus on its core strengths, Fiat Chrysler Automobiles (FCA) has confirmed that it will spin off its parts business, Magneti Marelli, within the next twelve months.

The creation of a separate company will be subject to regulatory approvals and final approval by Fiat’s board of directors, with shares expected to be listed on the Milan stock exchange. A statement released by FCA said shares of a new holding company for Magneti Marelli would be distributed to existing shareholders.

The spun-out parts division could be worth as much as €5 million and will allow FCA to focus on vehicle development at a time when car companies are being pushed to research new powertrains and methods of transportation for an electric and autonomous future. Marchionne said he is focusing on the Italian carmaker’s new five-year strategy, due to be unveiled early next year, which will address how FCA will deal with challenges stemming from new electric and self-driving technologies.

′The separation will deliver value to FCA shareholders while providing the operational flexibility necessary for Magneti Marelli’s strategic growth in the coming years. The spin-off will also allow FCA to further focus on its core portfolio while at the same time improving its capital position,’ FCA CEO Sergio Marchionne said. ′A separation of FCA and Magneti Marelli is a key ingredient of the 2018-2022 Business Plan which will be communicated in June. The FCA Board of Directors is confident that this separation is the proper next step, and will be beneficial for Magneti Marelli, FCA and our shareholders.’

Magneti Marelli has often been seen as a takeover target, with Samsung Electronics making an approach for the business in 2016. Various manufacturer rivals and private equity firms have also shown interest in taking the company from FCA, but with no firm offers, spinning out the business is the next course of action.

The move will be in keeping with a trend developing in the automotive industry, allowing companies to become more specialised in the move to both electric and autonomous vehicles. Delphi divided last year into vehicle-propulsion systems producer Delphi Technologies and Aptiv, which focuses on connected and autonomous cars, while German tyre and powertrain maker Continental said in January that it is mulling a possible revamp.

FCA had also looked at the possibility of spinning out its Alfa Romeo and Maserati brands into a separate business in order to unlock cash and aid focus on the main car business. However, Marchionne suggested in December that any discussion into this potential new business is some way off.