News Column

Marchionne Downplays Sell-off of Fiat Shares

August 6, 2014

Brent Snavely, Detroit Free Press

Fiat CEO Sergio Marchionne (file photo)
Fiat CEO Sergio Marchionne (file photo)

Aug. 06--Shares of Fiat fell sharply for the second consecutive day Wednesday after trading was suspended briefly as some investors want to cash out rather than go along with the merger of Fiat and Chrysler.

In reaction, CEO Sergio Marchionne downplayed the sell-off and said the merger is not in danger.

Fiat has acquired all of Chrysler, but Fiat stock fell 7% Tuesday and fell another 5% today on the Milan Stock Exchange because some Fiat's shareholders are expected to ask for cash rather than take shares in the new company.

"To be honest, I think the press has overplayed the shareholder withdraw rights issue," Marchionne said. "We are paying the price for an over-reaction...this is based on a lack of understanding about what is going on."

Shareholders have until Aug. 20 to notify Fiat if they want cash or shares in Fiat Chrysler Automobiles.

"As of yesterday, we have not received any notices of a desire to exercise that right (to receive cash)," Marchionne told analysts Wednesday. "I am absolutely unfazed by all of this."

Marchionne made the comments after Chrysler reported second-quarter earnings of $619 million, up 22% from a year earlier, largely due to stronger sales of pickup trucks and SUVs.

Chrysler's revenue increased 14% to $20.5 billion for the three months ending June 30, compared with $18 billion a year earlier.

Sales of 723,000 new cars and trucks during the quarter was up 11.4% increase over last year.

In addition, the company's U.S. market share grew to 12.1% from 11.4%.

Selling more cars and trucks at higher prices more than compensated for the higher cost of incentives on some older models.

Based on its performance over the first half of the year, Chrysler said it now expects to sell 2.9 million cars and trucks this year. That's 100,000 higher than its prior expectations. The automaker also said it still expects to earn a profit of $2.3 billion to $2.5 billion for the year.

Last week, Marchionne said net income from the combined company's North American business fell because of the cost of launching the 2015 Chrysler 200 and higher incentives. Worldwide, Fiat Chrysler's second-quarter earnings fell 55% because of falling sales in South America.

According to Edmunds.com, incentives for the first six months of the year increased 47% for the Chrysler 300, 136% for the Dodge Dart, 228% for the Fiat 500, 37% for the Jeep Compass, 44% for the Jeep Grand Cherokee and 44% for the Jeep Patriot.

Incentives for Chrysler's popular Ram 1500 pickup have decreased by 5% over the first six months of the year, Edmunds.com research shows.

Chrysler has boosted incentives 21% for its heavy duty Ram 2500 and 52% for the Ram 3500.

Contact Brent Snavely: 313-222-6512 or bsnavely@freepress.com. Follow him on Twitter @BrentSnavely.

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(c)2014 the Detroit Free Press

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Original headline: Marchionne 'unfazed' by market jitters over Fiat Chrysler merger


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Source: (c)2014 the Detroit Free Press


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