FIAT Chrysler Q4 2019 and Full Year 2019 Earnings

[Bili]

https://seekingalpha.com/article/43...-on-q4-2019-results-earnings-call?part=single

Mike Manley
...

Now, as you know, during 2019, the group reinstated the payment of ordinary dividends after nearly a decade. And based on our strong 2019 results and as previously announced, we plan to pay a €1.1 billion ordinary dividend to our shareholders this spring, subject to customary approval by our Board and shareholders.

So, now, let me give you some context to why I see 2019 as such a pivotal year for FCA and how the actions we have taken and intend to take will ensure our continued position as a leading global OEM. Now, clearly, the most significant action taken was in December, when we signed a binding combination agreement with PSA for a 50-50 merger that will create the third largest global OEM by revenues.

Multiple work streams related to both closing preparation and integration planning are in place and are being led by senior leadership at both companies and we do not anticipate any significant hurdles to close in the transaction, either by the end of this year or early in 2021.

Now, just to remind you, we target annual synergies of at least €3.7 billion at steady state, with cumulative implementation costs of approximately €2.8 billion. And there are three major drivers for the synergies. The first driver, which accounts for 40% and relates to platform and powertrain convergence, optimizing our investments in R&D and improving manufacturing processes and tooling efficiencies.

The second driver, also at 40%, is about purchasing savings, where we will leverage our larger scale to improve product costs and gain access to new suppliers, particularly for electric and high-tech components.

Now these actions reinforce our drive towards clean and affordable mobility. Now clean and affordable mobility means that we need to be cost competitive in buying all the electrical powertrain components and batteries. And that means the volume scale effect coming from the size of the new co will be paramount to ensure we deliver the cost competitiveness we need.

And the third driver, which accounts for 20% of the total, will be related to multiple areas such as marketing, IT systems, logistics, and administration efficiencies. Now, these synergies will be net cash flow positive from year one and we expect from our planning to deliver approximately 80% of the total synergies by year four.

 

[Deckard Cain]

Actually not true. They are very similar in that regard.

They are already selling EVs and PHEVs. They are well ahead in product to market deployment.

 

[Bili]

They are already selling EVs and PHEVs. They are well ahead in product to market deployment.

Are they? AFAIK FCA has had PHEV and BEV long away ago in North America. Besides know how and offering something and even be able to sell something are two if not three completely different categories.

AFAIK PSA media day / first drives for 208 BEV, 2008 BEV and 508 PHEV is this week in Stiges, Spain. For example 500 BEV media day is around 4 months from today.


Mike Manley

Thanks, Richard. If we go to the next page, I just wanted to make a few points on a subject that obviously has received a lot of attention over the last several months and that will continue to receive that level of attention going forward. And that is CO2 compliance in Europe. Now we've been updating the markets on our plans in this area for some time.

We know the regulatory hurdles get much tougher this year and as a result, this has caused the heightened concern by some in the financial community about the ability of certain OEMs to meet their new CO2 targets. And one of the biggest uncertainties is regarding market demand for EVs and the potential for margin erosion in the event that demand has not naturally materialized.

Obviously, only time will tell how the market actually evolves in 2020 with EVs. However, and I'll try to show you with this walk that we believe that our multi-pronged approach will not only allow us to achieve the CO2 targets this year without paying fines, but it will also allow us to adapt to evolving market demands. So as you can see, while the pooling arrangement, we entered into a test last year as part of the path to achieve compliance. It is only a complementary piece of our broader plan, which includes the launch of four high-voltage JVs this year, including the new Fiat 500 as well as plug-in hybrid versions of Jeep, Compass, Renegade and Wrangler. And in addition, we'll continue to roll out improvements in so-called conventional technologies.

For example, we'll further expand the application of our new GSE engine family into the Compass and Tipo as well as launch mild-hybrid versions of the Panda, 500 and Ypsilon. And when taken all together along with the 5% compliance exemption allowed this year, we fully expect to achieve an average CO2 result for our fleet that is below the expected to compliance target.

Now, I realize we're only one month into the New Year and a lot can change and probably will change but based on the data, we have for January. We have started the year with a sales mix in line with our full year compliance plan. Obviously, we will see how the year progresses and clearly update you in quarterly calls. But I think we're off to a reasonable start.

 

[Deckard Cain]

Are they? AFAIK FCA has had PHEV and BEV long away ago in North America. Besides know how and offering something and even be able to sell something are two if not three completely different categories.

AFAIK PSA media day / first drives for 208 BEV, 2008 BEV and 508 PHEV is this week in Stiges, Spain. For example 500 BEV media day is around 4 months from today.

Doesn't matter. PSA is ALREADY selling EVs. They've been selling EVs for years (even if it was the ****ty iON/C-Zero/iMiev), since 2011 to be more precise.
And the DS3 eTense can already be bought. That one shares the base with the e208 and Corsa. And if they have less know-how then they are at least more effective at using the little know-how they have into pushing atractive products to market.

 

[Bili]

Doesn't matter. PSA is ALREADY selling EVs. They've been selling EVs for years (even if it was the ****ty iON/C-Zero/iMiev), since 2011 to be more precise.
And the DS3 eTense can already be bought. That one shares the base with the e208 and Corsa. And if they have less know-how then they are at least more effective at using the little know-how they have into pushing atractive products to market.

CZero was a rebadged Mitsubishi.

FCA got a lot of know how from electric 500, Pacifica PHEV...

Most analysts agree on one thing. Both PSA and FCA are late in offering EV technologies in Europe.

PSA is not cost effective. They are almost non existent outside of Europe. And they have much more narrow vehicle range globally if we compare it to FCA.
Thus R&D spending is lesser than FCA's.


Mike Manley
Well, what we do is -- not just for our battery electric vehicles, but for all of our vehicles is, we clearly particularly with the brand like Maserati where powertrain is an absolute embedded DNA for that brand is to make sure that we have stretching targets in terms of performance of the vehicle and obviously, when you got a battery letter that's going to be a combination of range as well as the dynamic performance of the vehicle.

We have significant internal experience in terms of electrification. You may have heard me focus on the fact that we are number one mild-hybrid seller in the United States. We have the number four plug-in hybrid in the United States. We launched the Fiat 500 BEV in the United States, so I think from memory three years ago it was the third highest seller. So we have a lot of internal resources. But we do work in partnership. We have to work in partnership with your battery producers because it is a much, much more complicated controls and integration system. But you -- any OEM has to have a large degree of that core skill sitting within their organization and I'm pleased that within our engineers we do as well.

 

[patfromigh]

PSA was badge engineering the Mitsubishi i-MIEV in Europe. Opel had access to GM's Volt and Bolt when they were part of GM, but since PSA bought Opel/Vauxhall GM put severe restrictions on any use of that technology.

Unlike the the US Marines, GM leaves people behind. When the Volt program was cancelled, GM let a lot of the people go who were involved. Some of these people now work for FCA. The GM people in Europe who contributed to the Bolt and Volt programs now work for PSA. The two companies combined will present a formidable body of knowledge and experience.

 

[Bili]

@patfromigh

AFAIK FCA got a lot of expertise through Magneti Marelli. Not only that but in recent years in advance of Magneti Marelli to sell of FCA had switched a lot of workforce from Magneti Marelli to other FCA subsidiaries because of electrification technologies development.