In order to pave the way for an eventual takeover of majority stake in Chrysler, Fiat has announced some housecleaning. According to the Associated Press, Fiat has split into two companies, separating Fiat industrial from its consumer automaking unit. The goal of the Fiat split, claims Fiat and Chrysler CEO Sergio Marchionne, is to create a global automotive company with Chrysler LLC.
Fiat split could lead to Chrysler takeover in 2011
Marchionne views the Fiat split as a means through which Fiat will eventually take majority interest in Chrysler, calling a 50-plus percent majority possible if Chrysler goes to market this year. “There will be an advantage if that happens,” said Marchionne at the Milan Stock Exchange.
Back in 2009, Fiat took a controlling 20 percent share of Chrysler in a deal in which Fiat gave Chrysler information on small car and clean engine technology and provided management consultation. Fiat expects to gain at least 35 percent ownership in Chrysler this year, although a 51 percent share is possible if Fiat repays Chrysler’s auto bailout loans.
Greater clarity, greater ability to form alliances
According to Marchionne, the Fiat split makes Italy’s largest employer more able to operate with greater clarity to address each individual business’s needs. Each company will also have greater freedom to pursue advantageous alliances. Projected revenues by 2014 are 64 billion euros ($85 billion) for Fiat auto and 29 billion ($39 billion) for Fiat Industrial. By that time, Marchionne would like to see Fiat auto produce 6 million cars per year. This transition will make that milestone easier to achieve.
“Faced with the great transformations in place in the market, (Fiat) could no longer continue to hold together sectors that had no economic or industrial characteristics in common,” said Marchionne.