Fiat\'s Needs Before The Merger With Chrysler
|   Thursday, November 01, 2012
Sergio Marchionne, leader of both Fiat and Chrysler groups, still aims at bringing the two entities together in 2015. Before complete union of Fiat and Chrysler, Fiat has to solve some problems experienced in the European market.

"Our primary objective right now is fixing the European environment and getting that up and running so we can restore the full Fiat level of profitability that it needs to achieve," CEO Sergio Marchionne said.
In 2014, Fiat, which currently owns 58.
percent of Chrysler, expects a profit drop of 31 percents down to 5.2 billion euro (6.7 billion dollars).

In this year, the Americans from Chrysler reported on the 29th of October third-quarter net income figures of 381 million dollars, an 80 percent increase from the previous year. The company also confirmed its forecast for the 2012 profit of 1.5 billion dollars. This happens due to high demand for 200 sedans and Jeep Grand Cherokee sport-utility vehicles.

On Tuesday, Fiat reported it had 20 billion euro of available liquidity at the end of the third quarter, meaning nearly 3 billion euro have been shaved off from the 22.7 billion euro reported on the 30th of June. The company, however, is expecting to generate more money from operations during the last three months of the year.

"If I were to take a look at cash utilization, given our plan here, there's no room left for the acquisition of the minority interest in Chrysler," said Marchionne. When asked by if he would consider ways to raise funds in order to complete a Fiat and Chrysler merger, Marchionne said that option is an wide open.

The business plan, recently presented by Fiat, provides 19 new models in Italy by 2016. Of them, 15 will be made both for export and Europe's market.

In regards to the merger, Fiat said last month that it had asked a U.S. court to confirm the price it must pay to increase its controlling stake in Chrysler. This comes after failing to reach an agreement with the United Auto Workers' retiree health-care fund (VEBA), which owns the rest of Chrysler. The Delaware Chancery Court will most likely rule on the matter before the year is up, or so Marchionne thinks.

"Once registration is in place, then I think they could ask that we take it public, and we will comply if they so desire," he said. Fiat is "standing by" its call options and will not shy away from using them if it comes down to it.
This year, Chrysler will use 107 percent of its production capacity. The U.S. automaker, in 2010, only used 73 percent of capacity, measured on 16 hours of output during 235 workdays per year.

The Fiat group's problems are heightened by its troubled home market, accounting for half its European sales. Its factories in Italy, where car sales are likely to hit the lowest level in more than three decades this year, are running at half capacity, way below the 80 percent usually considered profitable. Chrysler, however, is enjoying a rising United States auto market.
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