Fiat shares rise on merger update

After Chrysler/Fiat CEO Sergio Marchionne announced the merger of Chrysler and Fiat would be 50 percent complete by the end of this year, the company’s stock rose 7.04 percent, regaining the four-euro level last seen in December. In addition, Goldman Sachs raised its outlook for Fiat SpA and Fiat Industrial to positive from neutral with a target of eight euros, saying it is looking for good things to come of the integration of the two companies.

Marchionne made his predictions based on the increasing overlap of management and procurement between the two automakers.

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Fiat may build Dart-based cars in China for export to Europe

Automotive News is reporting Fiat SpA is planning to build two cars based on the new Dodge Dart in partnership with Guangzhou Automobile Company at the Guangzhou plant in Hunan Province. The cars would be exported to Europe, badged as Fiats.

The first would be a sedan with Fiat styling. The second would be a hatchback to replace the long-running Bravo, which is due to end production next year. Fiat’s Cassino plant, which currently builds the Bravo, would switch over to a new crossover to compete with the Nissan Qashqai.

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Marchionne reiterates “one company”

In a generally inspirational letter to Chrysler employees, Sergio Marchionne pointed out how far Chrysler had come in the last two years. Journalists then were predicting Chrysler’s demise:

“They underestimated the energy, the capabilities and the composure under crisis that sustain the people who comprise the soul of Chrysler. Now, the tone of coverage has shifted, focusing on our comeback story and on what matters most, our products. We didn’t get caught up in the press clippings before, and we can’t afford to bask in them now. We understand that there is a great deal of work ahead of us. … You have shown tremendous courage in taking responsibility for the fate of Chrysler in your own hands. Your sense of purpose and passion has restored pride and credibility in our company. You are the authors of a remarkable story in 2011, and I look forward to continuing our journey and writing an exciting new chapter in 2012.

Marchionne also pointed out that all loans have been paid back to the U.S. and Canadian government, with interest, six years ahead of schedule.

He predicted a net profit target of $600 million for the full year, and affirmed that the goal is a single Fiat and Chrysler company (presumably to continue to be named Fiat):

A new, combined management structure is leading the Fiat-Chrysler organization going forward, with the objective of eventually creating one global car company. Signs of our alliance taking deeper root included the return of the Fiat brand to North America, the introduction of Jeep and other Chrysler Group vehicles into more international markets, the continued implementation of World Class Manufacturing principles in our production facilities, and closer collaboration in engineering and procurement activities.

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No Chrysler-Fiat merger in 2012

Interviewed in London, Sergio Marchionne, CEO of Chrysler and Fiat, said there are no plans to fully merge Chrysler and Fiat next year. Marchionne also told reporters that there are no plans to raise capital to purchase the Chrysler stake held by the United Auto Workers’ Voluntary Employee Beneficiary Association (VEBA), which would also seem to rule out an initial public offering in 2012. Marchionne previously said he doesn’t trust the U.S. financial markets at this time.

Marchionne is optimistic about Chrysler’s performance in the U.S. but pessimistic about the outlook for Fiat in the European market. He sees a shortfall this year and an even poorer performance next year.

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Mopar to sponsor Jeg Coughlin Jr. in 2012 NHRA Pro Stock season

At today’s opening of the Specialty Equipment Market Association (SEMA) show in Las Vegas, Mopar announced will add four-time NHRA Pro Stock champion Jeg Coughlin Jr. to the Team Mopar roster in 2012. Coughlin will campaign a new Mopar/JEGS.com Dodge Avenger in the NHRA Full Throttle Drag Racing Series Pro Stock class.

“Jeg Jr. is a proven winner, with four Pro Stock championships on his résumé,” said Pietro Gorlier, President and CEO of Mopar. “We are thrilled to add an elite driver to Team Mopar, and we look forward to sharing in his great success at the drag strip next season.”

“I’m extremely excited to join forces with Mopar in 2012,” said Jeg Jr., the only racer in the history of the NHRA to win a national event in six different classes. “The entire Coughlin Brothers Racing team has high expectations for the 2012 season and we expect to field a premier program with our Mopar/JEGS.com Dodge Avenger team, from top to bottom.”

Jeg Coughlin Jr. will join veteran racer Allen Johnson as the only two drivers in the Pro Stock class directly sponsored by Mopar.

“Adding Jeg Jr. to the Team Mopar roster is a great addition for the brand,” said Allen Johnson, driver of the Mopar Dodge Avenger. “This puts at least two very strong Mopar cars in the Pro Stock field next year, and I think it gives the brand an excellent chance of seeing a Mopar-powered driver bring home the Pro Stock championship in 2012.”

“Allen Johnson and his father Roy Johnson have a long history with Mopar and have built a highly respected program with their J&J Racing team,” said Jeg Jr. “Between our two teams, I think you’re going to see a Mopar Dodge in the winner’s circle at many NHRA events next year.

“When we pull through the gates at Pomona for the NHRA Winternationals (the 2012 season-opening event), with the lofty goals we’ve set for ourselves, we expect to have a car that can qualify on the pole and win on Sunday. I believe the Mopar/JEGS.com Dodge will be able to fire some shots off the bow immediately.”

Coughlin captured the 2004 U.S. Nationals Mopar HEMI Challenge event win driving a 1968 Plymouth Barracuda, raced a Mopar HEMI-powered Dodge Pro Stock car during the 2005 NHRA season and currently owns and occasionally competes in Sportsman events in a Mopar Challenger Drag Pak.

“I have a number of firsts involving Mopar,” said Jeg Jr. “My first car was a 1983 Dodge Charger. One of my first jobs as a teenager at our JEGS business was to organize the warehouse and create space for a brand that was expanding its parts line — the Mopar Direct Connection brand.

“The passion I’ve witnessed in the folks I’ve dealt with at Mopar and Chrysler Group is second-to-none. Their enthusiasm and excitement is a big reason this program came together, and that passion is something that will fuel our team next year.”

Mopar also announced at the SEMA show in Las Vegas that it will expand longstanding relationship with Don Schumacher Racing and its sponsorship of Dodge Charger R/T Funny Car driver Matt Hagan. Mopar, along with partners Pennzoil and Magneti Marelli, will increase its presence on Hagan’s car for the entire 2012 NHRA Full Throttle Drag Racing Series.

Hagan raced with a special Mopar graphics scheme on his Dodge Charger R/T Funny Car this season at the Mopar Mile-High NHRA Nationals, qualifying third and making it to the finals of the event. He also carried the Mopar colors at the U.S. Nationals in Indianapolis, where he reached the semifinals.

“Matt Hagan is one of the best young talents on the NHRA circuit and has been a great brand ambassador for Mopar,” said Gorlier. “Mopar has enjoyed a long and successful relationship with Don Schumacher Racing, one of the elite organizations in motorsports, and we are happy to increase our sponsorship on Matt Hagan’s Dodge, and welcome partners Pennzoil and Magneti Marelli in support as well.”

Jeg Coughlin Jr. Career Highlights:
Four-time NHRA Pro Stock champ (2000, 2002, 2007, 2008)
Five-time NHRA world champ including 1992 Sportsman title in the Super Gas class (1992)
Only driver in NHRA history to win a national event in six different classes
Only driver in NHRA history to win national events in four different classes in one season (1997 – Pro Stock, Super Stock, Competition, Super Gas)
Just the tenth driver in NHRA history to claim 50 national event victories

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Marchionne comments on merger; moving

Richard Hilgert, equity analyst with Morningstar, asked Sergio Marchionne about the progress, in terms of early innings or late innnings, of the integration of Chrysler and Fiat. Marchionne replied, “It’s almost impossible for me to give you a percentage of the extent to which the integration between these two houses is progressing because a lot of work went on prior to the announcement of the new global leadership team that was put in place as of September first.

“I’ve been working directly with my U.S. colleagues on the leadership side now since June of 2009 and as a result of that interface and the operations of Chrysler we were able to select a group of people that best represents the elements to which we are going to integrate the operating structure of Fiat worldwide.

“It has been an ambition of ours, which we executed relatively quickly in the process, to integrate purchasing and to integrate the development of products in a way which coordinated activities across the globe. That started effectively in 2009 and the benefits of that association have been coming through a piece at a time as we convert suppliers and as we combine volumes.

“I don’t have a number to give you today; we might give you a number at the end of this year and tell you what we think, in terms of purchasing savings, is attributable to what we loosely refer to as other acquisition gains or volume gains associated from the association and we’ll give you a yearly number of what we think was accomplished in 2011.

“I go back to what I said earlier about the fact the real benefit associated with this is in term of providing convergence of architectures and components. This is going to become the dominant theme across Chrysler and Fiat as we move forward between now and 2014. But I don’t think that there’s anything else that we could have done, just in terms of your parallel to innings, there’s nothing that we could have done faster in terms of providing (pause)…these integrations are difficult to execute because you’ve got to make sure that you maintain the integrity of the industrial machines while you try and carry on convergence. You cannot do this at all costs and you certainly must do it in a way that maintains the same commitment to industrial efficiency and quality that we are now becoming finally known for in the United States. You need to give this organization some time to get all the gears lined up and to make that lineup visible.

“I have no problem with sort of laying out what we think ultimately the benefit is going to be but it’s very early in the game and I think the real benefits of all this, in terms of the plans that we laid out, are only going to be truly visible by 2014. Having said this, I have no problem with giving you regular updates as to what we think the alliance savings are.

“We’ve got to be very careful that we don’t fall in love with the notion of alliance savings that we forget operating performance. I’ve made it very clear to both sides of the house, since I’ve been responsible for both, that there’s a P&L accountability for the various regions, including Fiat’s on its own and Chrysler on its own. And our ability to respect and remain faithful to the objectives that we laid out in November 2009 remains the paramount concern of this leadership team.

I’ve never bullshitted the markets in my life; I’m not gonna start it now. But we made the commitments back in 2009; it was done with a very clear commitment to deliver them. Now, I don’t want this house distracted by McKinsey-type strategic studies that prove that alliance values have been delivered; it was at the heart of the alliance with General Motors back in 2001 which we all know ended up in a rather unpleasant fashion. The objective here is to keep them focused and on performance and all of this is going to be visible in margin and operating performance.”

Paul Eisenstein of the Detroit Bureau asked about moving more of the corporate structure to the United States. Marchionne replied, “I think that the book is open on that solution. Our issues here (Marchionne was participating from Italy) are issues that have to do with the way in which at least parts of the union world have reacted to the requests that we have made and I think which is totally consistent with things we have done in the United States to try and move the organization on. Obviously, we have run into some reluctance on the side to get this done by a minority of the blue-collar workforce which, unfortunately, is incredibly loud. It’s catching the headlines but I don’t think it reflects the view of certainly the majority of our people.

“I would not take that as an indication or as a basis on which the ultimate decision as to the convergence of corporate governance systems – how that decision is going to be made. It will be made at the right time.

“There are a few things that remain a key objective for us: one is to find a way to monetize the VEBA interest in Chrysler, which was part of the deal that we struck back in 2009 when we took an equity interest in Chrysler and, secondly, a way of ensuring that we have access to capital markets to properly finance the organization as it grows and moves forward. So, once we have a clear way to that objective, then we’ll make a determination as to how the actual convergence of the two corporate organization happens. But I have no pre-ordained view and I’m not biased one way or the other;: I think we’ll make the right call at the right time.”

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