Strategic demerger in the future for Fiat and Chrysler

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Fiat concept car

Fiat is well-known for progressive vehicle design. Image from Flickr.

Wednesday morning, partners Fiat and Chrysler have planned a press conference that will help determine the direction of these companies for the future. Fiat has a 20 percent ownership stake in Chrysler motors, and the two companies have strategic plans  for coming years that involve each other.

Fiat SpA to demerger

Sources inside of Fiat say that Wednesday’s press conference will be used to announce several big changes at the Italian carmaker. First, Fiat will separate itself into two different units. A separate car division will be financed with a stock sale of the new division as well as by several banks. The truck and tractor divisions of Fiat would remain as a company of its own.

New leadership at Fiat

Luca Cordero di Montezemolo has been the head of Fiat for six years. Luca has announced his intention to resign at tomorrow’s press conference. The board of directors of Fiat will most likely vote in John Elkann as the new head of Fiat. John Elkann is the grandson of Gianni Agnelli, the founder of Fiat. Chief Executive Sergio Marchionne confirmed that John Elkann will become the Chairman.

Strategic partnerships

The reason for the Fiat demerger is partially in response to the belief of Marchionne and Elkann that only the largest carmakers will survive the current restructuring of the vehicle industry. Fiat Chrysler is a 20 percent partnership – with Chrysler developing vehicles jointly with Fiat for 2012 release.

Chrysler’s Wednesday presentation

On the same day as Fiat’s expected announcement of a demerger, Chrysler will be presenting post-bankruptcy financial documents. The still-struggling automaker is expected to present first the strategic plan it is undertaking with Fiat. Second, Chrysler is set to show cash savings, cost cuts, and general performance since the June bankruptcy. While GM has been closing Saab, Hummer, and Saturn brands, Fiat believes that Chrysler is still a sound investment.

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