FCA Stock Price Zooms After China Bid Rumour.
Idea Is Leaning On An Open Door, But Lacks Confirmation.
“a deal with the Chinese would be better than the one Marchionne sought with GM”
Fiat Chrysler Automobiles (FCA) stock price jumped a massive 8 per cent on rumours it was about to be taken over by an unknown Chinese company.
FCA declined comment, and the identity of any possible Chinese bidder never emerged, but talk of the company being taken over is believable, given CEO Sergio Marchionne’s long expressed wish to be taken over either by General Motors in particular, or anyone with enough money in general. The fact Marchionne has recently played down any talk of a takeover, saying he was concentrating on meeting his ambitious targets for FCA, didn’t stop the stock market excitement.
Morgan Stanley has long been a believer in the spin-off of at least FCA’s Jeep SUV subsidiary. In July the investment bank said it wants FCA to follow the Ferrari example and float off Jeep, which it says might achieve its ambition of sales of at least 2 million by 2018.
Others, like Citi Research, only saw massive debt when they looked at FCA, although it liked the success of Jeep, the renewal of SUVs and pickups, the exit from the U.S. sedan market, Alfa’s revival and conceded some progress on the debt.
Morgan Stanley jumped at the chance of pushing its theory on FCA after the rumours, and published a report saying why a Chinese partner would make sense, and said
- China is the world’s largest SUV market
- China wants investment in foreign manufacturers
- China could significantly expand its U.S. presence quickly, saying it would take decades for a foreign firm to develop the production capacity and distribution/service infrastructure that FCA has in the U.S. now.
- Avoids potential anti-trust problems that would arise in the big truck segment if a deal with either Ford or GM was planned.
Automotive News columnist Larry Vellequette said a deal with the Chinese would be better than the one Marchionne sought with GM.
“Consider that a potential FCA/GM merger would have involved, at its outset, closing plants, shuttering duplicative departments and culling thousands of dealerships across North America. But a potential Chinese owner would look at FCA’s manufacturing footprint and dealer network as the company’s vital assets, enabling access to Jeep as well as a ready-made retail network with which to import Chinese-made vehicles to the U.S.,” Vellequette said.
Automotive News broke the FCA/China story.
Vellequette then pointed to the success of the Volvo XC90, as an
impressive result of Chinese collaboration.
Expect more rumours on FCA’s future.