Fiat Will Set Ferrari Free
In the wake of big changes going down at Fiat Chrysler Automobiles, Ferrari is being spun off into its own separate business entity. In a press release, Fiat announced that Ferrari would be set free under the company’s new capital implementation plan, and that Ferrari shares — approximately 10% of them, anyway — will be open to the public in the United States and possibly Europe.
“I am delighted to have taken this additional step in the development of FCA. Coupled with the recent listing of FCA shares on the NYSE, the separation of Ferrari will preserve the cherished Italian heritage and unique position of the Ferrari business and allow FCA shareholders to continue to benefit from the substantial value inherent in this business” said John Elkann, the chairman of FCA, in a press release.
Though the spinning-off process is likely to take time, company management seems confident in the decision to let the Italian-based luxury sports car manufacturer blaze its own path.
“As we move forward to secure the 2014-2018 Business Plan and work toward maximizing the value of our businesses to our shareholders, it is proper that we pursue separate paths for FCA and Ferrari,” said CEO Sergio Marchionne. “The Board supports management’s determination that this transaction represents FCA’s best course of action to support the long term success of the Group while at the same time substantially strengthening FCA’s capital base.”
There’s reason for excitement on both sides of the separation, as Ferrari will now be free to make decisions more fitting to its market, and Fiat will have more capital and assets to refocus on its battles with rivals. Currently the world’s seventh-biggest automaker, Fiat certainly has some ground to make up.
The markets seem to have responded well to the news, as USA Today reports that Fiat shares jumped by as much as 12% after the news first broke. The company’s stock was moved to a primary listing on the New York Stock Exchange in the middle of October, and maximizing profits for shareholders is of the utmost importance to company leadership. Ferrari may have become a barrier to Fiat’s long-term plans, as the company sells very few cars relative to other brands — about 200 per month in the United States.
Upon entering the fray in the U.S. stock markets, Fiat is looking to reinvigorate its customer base for its American-based brands, including Dodge, Chrysler, and Jeep. “Half of our car volumes are in the United States. I want this to be a U.S.-listed company,” Marchionne said, according to a report from Yahoo Finance. His confidence is likely brimming from a month during which Fiat and its subsidiary companies outsold Toyota in North America, and despite some doubts from analysts and bankers, Marchionne believes his company is set to do some damage.
“Given where Chrysler was five years ago, that achievement gives us some satisfaction,” Marchionne said, referring to Fiat’s overtaking of Toyota in terms of sales at the Paris Auto Show. “I believe the stock will interest American investors.”
As for Ferrari, what does the future hold? Well, considering the company’s newfound freedom, the sky truly is the limit. The company’s brass has already set forth with an ambitious — albeit radically different — agenda that includes the hybridization and turbocharging of all future vehicles Ferrari produces. There’s also the strong chance that Ferrari will put some considerable effort and resources into reclaiming glory on the racing circuit, where it has underachieved as of late.
Either way, it appears that both sides will mutually benefit from the split. Ferrari seems to be a more natural fit on its own anyway, rather than nestled under the same corporate umbrella that produces minivans and Jeep Wranglers. The question going forward is whether Fiat will be able to wisely reallocate its resources to take on Ford, GM, Toyota, and Honda, and if Ferrari can successfully blaze its own path into the future.
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