Fiat Chrysler Automobiles has revealed that it will be spinning off its components business. The automaker, however, said that there have been no solid offers yet. This was revealed by Sergio Marchionne, the chief executive officer of the automaker during the Italian Grand prix qualifying session for Formula One. Marchionne is also the chief executive officer of Ferrari.
“There are some activities at the component businesses which don’t belong to the car business and the group must be purified from those assets,” said Marchionne.
5-year business plan
Marchionne, who is set to leave Fiat Chrysler Automobiles in 2019 is working on a five-year business plan which is going to be his last. Earlier in July he had indicated that fundamental changes were on the way as the automaker pushes to get rid of debt amounting to approximately $5 billion before the end of 2018. These are of the part of the plans Fiat Chrysler Automobiles has in order to increase the adjusted net profit to 4.7 billion euros at the minimum.
Though he didn’t provide details, Marchionne didn’t rule out the possibility of a merger. The chief executive officer of Fiat Chrysler Automobiles supports consolidation as he has argued that the car manufacturing sector engages in a lot of waste by developing various versions of similar technology. The pressure to consolidate is now more intense than ever owing to the fact that nations such as France and the United Kingdom has set deadlines within which they are planning to have eliminated combustion engines. Ride-hailing services and self-driving technologies are also posing a threat to the traditional business model of car makers.
Last month Bloomberg had reported that one of the options that was being considered by Fiat Chrysler Automobiles included having the components business separated. There was also the option of separating brands such as Alfa Romeo and Maserati. Magneti Marelli SpA, Fiat Chrysler Automobiles’ parts business, and other components units could have a value of approximately 5 billion euros while the luxury car businesses could be worth about 7 billion euros.
At the moment, however, Marchionne considers Maserati and Alfa Romeo to be immature businesses which need time so that they can be able to stand on their own and then they can be spun off as standalone companies. Separating FCA’s components is likely to take place when the five-year plan comes into effect in 2019. FCA’s board is expected to begin discussing the issue at a meeting to be held this month.