Fiat's budget meeting will be held at the Lingotto on 9 April. For the occasion, in addition to the accounts at the end of 2012, the shareholders will have to vote to approve the remuneration policy and the renewal of the authorization for the purchase and availability of treasury shares, expiring on 4 October.
But on that day, exactly four years after the Washington agreement which kicked off the Detroit adventure, there will be talk above all about Chrysler. In fact, a few days earlier, the Delaware court (limit date the end of March) will rule on the dispute between Fiat and the Veba fund which belongs to the Uaw over the price of the shares held by the union. And they will understand the times and ways to achieve the final objective of Marchionne's strategy: to reach 100% of Chrysler, a decisive step also in overcoming the terrible European crisis. As demonstrated by the numbers of the consolidated financial statements approved today by the board of directors, the first which includes the entire year of Chrysler.
WITHOUT DETROIT IN THE RED FOR 152 MILLION
Fiat's board of directors today approved the group's consolidated financial statements (in which Chrysler's full-year results are consolidated for the first time) which, as already communicated on January 30, close with a trading profit of 3,814 billion euros and a net profit of 1,411 billion, the atypical components are negative for 244 million.
For 2011, with Chrysler consolidated as of June 1, 2011, trading profit was €2.392 million and net income was €1.651 million with positive unusual items of €944 million.
Consolidated shareholders' equity (Group and minority interests) at December 31, 2012 amounted to 13.173 million euros (12.260 million euros at December 31, 2011).
As regards Fiat spa, 2012 closed with a loss of 152 million recognized in the “retained earnings/losses” reserve, with financial charges and net operating costs only partially offset by the result of equity investments. As already announced, the distribution of a dividend is not envisaged. Shareholders' equity at December 31, 2012 amounted to 8.902 million euros (9.053 million euros at December 31, 2011).
In short, nothing new to what was already communicated at the end of the board meeting at the end of January.
Since then, however, there has been no shortage of news.
The auto crisis in Europe shows no signs of receding. In January: according to Acea data, the decline for Fiat was 12,3% over the same period of the year which fell to just under 60 thousand units and the market share fell to 6,7% from the previous 7%. In this context, it will not be easy to achieve the objective, announced in a conference call, of reducing operating losses in Europe from the 700 million euros recorded in 2012.
In return, the Ferrari star shines, which ended 2012 with record results: sales of 7.318 units (+4,5% on 2011), revenues of 2,4 billion and a net profit of 244 million, up 18%. A valuation of 20 times profit, not to be excluded for a luxury brand (but Marchionne thinks of much higher multiples) could give the prancing horse an enterprise value of around 4,5 billion.
The group's accounts are still driven by the US subsidiary Chrysler, even if in the last quarter operating margins fell to 4,1% from 4,5% in the previous quarter. But the most disturbing aspect, which makes negotiations with the Veba fund more complex, is the trend of Chrysler's pension deficit, which increased from 2,4 to 8,8 billion in 2012 and is decidedly higher than forecasts, a major obstacle on the road to 100% of Chrysler's capital.
The value of the UAW's stake in Chrysler should in any case be around $3 billion. A major effort that Fiat could cope with in several ways:
a) A purchase financed on the market, possible even if it would lead the group to a high level of debt exceeding 10 billion euro. The group could take advantage of the good performance of the bond markets to issue bonds in excess of the 5 billion euro already approved.
b) According to Morgan Stanley, the most sensible move, also to give a bullish scenario to the Fiat share, goes through a capital increase of 1,5 billion. . Estimates by American analysts indicate little impact on the 2014 price/earnings ratio if Fiat were to issue shares to finance the approximately 3 billion euros needed for the acquisition. Marchionne, even recently, has denied the hypothesis.
c) The IPO hypothesis of Chrysler, probably the least appreciated by Lingotto, cannot be ruled out either. The high road of the operation, in fact, passes through the purchase of 100% of Chrysler and subsequent merger with Fiat into a single entity to be listed on Wall Street.
In short, the game is open. Marchionne has already opened negotiation tables with the investment banks so as not to find himself without financial ammunition on day X. In the hope that the possible currency war will not further complicate the game: the strengthening of the euro against the dollar and the real could not only affect the consolidated accounts of Fiat but also jeopardize the strategy of producing cars in Italy aimed at non-EU markets.
