June 1, 2018 / 6:00 AM / 6 months ago

Fiat Chrysler boss to tackle Europe, bet on Jeep in his last lap

* Five-year plan presentation to kick off at 0800 GMT

* Marchionne unveils last strategy before stepping down in 2019

* FCA met nearly all financial targets of last plan

* Investors worry about Europe margins, emissions woes, succession

By Agnieszka Flak

BALOCCO, Italy, June 1 (Reuters) - Fiat Chrysler boss Sergio Marchionne is expected to show on Friday how the carmaker plans to fix lagging margins in Europe, grow Jeep into a global giant and catch up in electric and self-driving cars - all without him in the driving seat.

The 65-year-old will present FCA’s strategy to 2022, one of his last contributions to the company he rescued from the brink of bankruptcy, merged with U.S. carmaker Chrysler and multiplied in value through 14 years of canny dealmaking.

After failing to secure a tie-up with a major rival that he said was necessary to manage the costs of producing cleaner and more intelligent cars, Marchionne needs to show the group can keep churning out profits on its own, even as emissions rules tighten, SUV competition intensifies and worries around his succession abound.

The executive, whose black crew neck sweaters have become his calling card, is expected to announce another aggressive target for Jeep, whose roots date back to World War Two vehicles and which has become FCA’s ticket to create a high-margin brand with a global appeal. FCA sold 1.4 million Jeep SUVs last year.

Investors also expect Marchionne to show he is finally serious about pushing into hybrid and electric cars to ensure the world’s seventh-largest carmaker remains in the race in the absence of a merger.

Marchionne has said he will step down as CEO in early 2019 and that his successor, who has not yet been identified, will be chosen from within the company.

FCA is on track to meet or exceed nearly all the financial goals it set in 2014, notably a commitment to become debt-free by the end of this year. Net debt stood at 1.3 billion euros ($1.52 billion) at the end of March, and Marchionne said he would take the unusual step of donning a tie on Friday if the target had already been reached by June.

But profitability in Europe is only gradually recovering, FCA has yet to make any significant inroads in China and Alfa Romeo - which along with Jeep and Maserati was the focus of the last strategy launched in 2014 - has yet to turn a profit.

Investors take reassurance from what Marchionne achieved in North America, which now makes three-quarters of profits.

FCA retooled some U.S. plants to boost output of lucrative SUVs and trucks, while ending production of unprofitable sedans.

The move got FCA close to erasing the margin gap with its larger U.S. rivals GM and Ford.

The North America “plan and its execution proved an inflection point in FCA’s equity story. A similarly credible exercise for EMEA (Europe, Middle East and Africa) will give investors confidence in targets for the region,” said George Galliers, an analyst at Evercore ISI.

FCA’s operating margin in Europe recovered to 3.2 percent last year. That compares to Europe-centric PSA Group’s global automotive margin of 7.3 percent.

To boost profits, FCA is set to keep converting Italian plants to churn out Alfas, Jeeps and Maseratis, while mass market models will be limited to certain markets, discontinued or moved elsewhere.

Marchionne is unlikely to announce any big deals on Friday other than providing details on the planned spin-off of parts maker Magneti Marelli and FCA’s strengthened partnership with Alphabet Inc’s self-driving unit Waymo.

Still, many investors bet the man who has multiplied Fiat’s value 11 times since taking over, notably by spinning off tractor maker CNH Industrial and Ferrari, is not done yet.

Marchionne has poured cold water on the idea of a Maserati or Alfa spin-off for now, but investors believe it is just a matter of time, “because premium brand spin-offs are one of the hottest topics in the sector right now,” said Michele Pedroni, a fund manager at Decalia Asset Management. ($1 = 0.8568 euros)

Reporting by Agnieszka Flak; Editing by Adrian Croft

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