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FCA gets no respect

by Bill Cawthon on

Segio-Dangerfield-Web
It seems no matter how many promises Sergio Marchionne keeps, or how many times his projections hit the mark, analysts aren’t going to buy it.

In the five months since its first listing (which was five months ago today), FCA stock has grown 62.2%. In the same period, Ford stock has risen 20% and GM stock has gone up 26.5%. The truth is that, since its taxpayer-funded IPO, GM stock has never grown as much as FCA. Its high point in December 2013 was just 19.6% higher than its original price.

In the years since the crash of ’09, FCA/Chrysler Group sales have grown 124.5% while Ford’s have increased 52.9% and GM’s have risen 41.7%, about a third of FCA’s jump.

Marchionne said FCA would sell a million Jeeps: in 2014, FCA sold just over a million Jeeps.

Last year, FCA posted a profit in Europe while Ford and GM reported losses.

Marchionne didn’t join the rush to Russia so, unlike some, he’s not currently idling plants.

Marchionne did turn Fiat around and then proceeded to do the same, and more, with Chrysler. And Chrysler’s turnaround got started during the worst recession since the Great Depression. Since that time, the company’s average year-over-year growth has been 17.7%.

Compare that to Ford’s average of 9.1% and GM’s average of 7.3%.

The people of Chrysler have created a fleet of winners to replace what were losers widely criticized for poor workmanship and shoddy components.

But it seems that Fiat Chrysler Automobiles is the Rodney Dangerfield of automakers when it comes to market analysts.

According to data complied by Bloomberg, FCA is the financial wizards’ least-preferred major auto stock.

Analyst George Galliers of ISI Evercore recommends selling the stock because FCA is burning cash, has more debt than its peers and is less profitable.

Yes, FCA does have significant debt. But unlike a certain Dearborn-based automaker, FCA didn’t mortgage everything including the sign on the building to raise the money. Marchionne and FCA CFO Richard Palmer have structured the debt to be manageable.

Yes, FCA is burning cash. But it’s replenishing that cash with revenues and it’s using the cash to develop new product and upgrade production facilities, not to stay alive.

Marchionne understands the need for profit but, unlike executives at certain other companies, he doesn’t place it before everything. Marchionne’s goal is to create a company that can survive long-term, not think short-term.

“Yes, Fiat is run by a genius with a unique focus on shareholder value,” Max Warburton of Sanford C. Bernstein & Co. said in a January 28 report quoted by Automotive News. “Yes, Fiat contains a number of attractive businesses. Yes, some of the growth plan may work. But haven’t expectations got far too high for a company that remains so fragile?”

First off, General Motors’ stock dropped 43.5% about 20 months after its first appearance. The world did not end and those that held onto their shares are now not only up 96.4% from that low of $19.36, they’re up from the original price.

Second, expectations are high primarily because FCA has delivered on prior commitments.

As far as being fragile, FCA is no more, nor any less, delicate than any other automaker. Macroeconomic forces, politics, and other potential problems could lie ahead but, if so, every automaker will face them and FCA seems to have sufficient liquidity to adapt and survive the changes. There’s certainly no shortage of talent, both engineering and financial, to ride out a storm.

Perhaps the analysts just don’t like FCA simply because it has embarrassed them so often?

Bill Cawthon grew up in the auto industry in the 1950s. His Dad worked for Chrysler and Bill spent a number of Saturdays down on the plant floor at Dodge Main in Hamtramck. Bill is also the U.S. market correspondent for just-auto.com, a British auto industry publication, and a member of the Texas Auto Writers Association, which has named the Jeep Grand Cherokee the “SUV of Texas” several times and named the Ram 1500 as the “Truck of Texas” two years running.

Bill has owned five Plymouths (including the only 1962 “Texan”), one Dodge and one Chrysler and is still trying to figure out how to justify a Wrangler. He also has owned at least one of every 1:87 scale model of a Chrysler product. You can reach him directly at (206) 888-7324 or by using the form.


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