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 The world's seventh-largest auto group has sought the U.S. listing
to help to establish itself as a leading global player through
access to the world's biggest equity market and the cheaper, more
reliable source of funding it ultimately offers.
But Marchionne has picked a difficult moment to woo U.S. investors.
Analysts think the U.S. auto industry is nearing a peak, while
Europe is struggling to recover from years of decline and growth in
China and Latin America has slowed.
"Only those willing to accept the risks of a highly leveraged
turnaround situation in a competitive, capital-intensive, highly
cyclical industry should consider investing," said Richard Hilgert,
an analyst at Morningstar, in a note.
Marchionne will ring the closing bell at the New York Stock Exchange
on Monday to mark the milestone for the 62-year-old chief executive
who revived one of Italy's top companies and helped rescue Chrysler
along the way.
"We're predominately a U.S. automaker with operations in foreign
countries. I want this to be a U.S.-listed company," Marchionne has
said. Half of FCA's sales are in North America.
Fiat took management control of bankrupt Chrysler in 2009 and
completed its buyout this year. It is now combining all of its
businesses under Dutch-registered FCA, which will have a UK
financial domicile and small London headquarters, with operations
centers in Turin and Detroit.
Wall Street is the first item on an ambitious agenda for the next
five years as Marchionne gears up for the launch of dozens of new
models, from funky Fiat 500s to sporty Maseratis.
The target is a 60 percent boost in sales to seven million vehicles
and a fivefold increase in net profit to as much as 5.5 billion
euros ($6.9 billion) by 2018 -- the year Marchionne has said he
would step down as CEO after seeing through his plan.
FCA's growth plans won't come cheap, though, and Marchionne will
need to be at his persuasive best if analysts are right with
predictions that the group will need to raise more capital to pay
for his 48-billion euro investment plan.
DETROIT POWER STRUGGLE
In comparison with GM and Ford, FCA is seen as less attractive
because of its aging model line-up, high debt, weaker margins in
North America and its small presence in China.
"Ford and GM also offer much stronger cash generation and balance
sheets, and are thus in a position to return cash to shareholders,
while FCA still needs to raise capital," Exane BNP Paribas analyst
Stuart Pearson said in a note.
FCA will decide on future financing options this month, though
Marchionne insists it does not need a capital increase.
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But some analysts think FCA is a good long-term bet because of its
potential in the fast-growing premium segment of the market with
brands such as Alfa Romeo, Ferrari and Jeep.
"Jeep's re-entry into China will provide Fiat with a turbo boost to
its share of the market," Morningstar's Hilgert said.
One U.S. investment banker said the true test for FCA would come
once it seeks to access U.S. capital markets. "Now would be the
worst possible time to ask investors for money," he said.
John Casesa, senior managing partner at Guggenheim Securities, said
investors would need to weigh the prospects of huge cost savings
from integrating Fiat and Chrysler, with the risk that the autos
market peaks in the next few years.
Marchionne hopes to see more than half of FCA stock changing hands
in New York instead of Milan, but appetite will take time to build,
especially as FCA has yet to switch to U.S. accounting principles
and to reporting results in dollars.
Marchionne will hit the road next month to spread the word. FCA may
also sell treasury shares and other stock after the listing in an
attempt to boost trading volumes.
He believes that FCA's cause will be aided by Chrysler's brand
strength in the United States, now the main profit center for the
combined group. FCA sold more cars in North America last month than
Toyota, the world's largest automaker.
The stock opens at 1330 GMT (0930 EDT) in New York and shortly
afterwards in Milan, where the group will keep a secondary listing.
Monday's opening price will be benchmarked against Fiat's previous
close of 6.94 euros ($8.76).
(Additional reporting by Laurence Frost and Paul Ingrassia in Paris
and Bernie Woodall in Detroit; Editing by Silvia Aloisi, David
Goodman and Mark Potter)
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