Wall Street pushing for FCA deal with Ford in Europe/SA, or purchase PSA

[AlexB]

There been couple of articles magicly popping up arguing for a deal to be had regarding the Italian Operations known as EMEA, also attacking Jim Hackett who is the CEO of Ford.

The theory amoung Wall Street is FCA needs scale in Europe while Ford can't fix & invest in China business/pay large stock dividends/absorbing money losing Europe-South American businesses plus additional $7 billion cash restructuring cost in those same regions all at the same time.
So the idea would be Ford would pay FCA to takeover Ford Europe together with Ford South America.
For would clean up its Global margins together with keeping the divided payout high , while FCA medium-to-long term gets scale on the relevant cheap and creating an larger European business with 10% or greater EBIT margins.
Or there's always the option of PSA which has been the most wiling Automaker to cut a deal with FCA.

Ford Motor Co. is pondering an exit from the South American market and has started shopping its money-losing business there to rivals Fiat Chrysler Automobiles NV and Volkswagen AG, according to people familiar with the matter.


The automaker made overtures to several competitors while considering its options for the unit, said the people, who asked not to be named because the conversations were private. Dearborn, Michigan-based Ford hasn’t shown a pretax profit in South America since 2012 and has lost $4.2 billion in the market since then.


Ford called Bloomberg’s report inaccurate. “Ford is not considering an exit from South America,” spokesman Brad Carroll said in an emailed statement. A Fiat Chrysler spokesman initially declined to comment, then said after Bloomberg’s story was published that the company hasn’t had any conversations with Ford about Latin America. A spokesman for VW declined to comment.


Chief Executive Officer Jim Hackett is willing to consider a range of options to get out of the business or at least end a prolonged period of losses, the people familiar with the matter said. Shopping the South American operation, which had $5.8 billion in sales last year, coincides with a global restructuring that the company said would take up to five years and cost as much as $11 billion. Ford is spending billions to develop electric and self-driving cars and Hackett has determined it can no longer afford to pour money into South America with scant hope of a decent return, one of the people said.

https://www.bloomberg.com/news/arti...op-money-losing-south-american-unit-to-rivals

"Wall Street says Ford Motor Co. must cut its dividend. The automaker says that’s nonsense."

"The debate erupting over Ford’s quarterly payout to shareholders -- including the founding family that derives millions from the disbursements -- is exposing a growing and contentious divide over what needs to be done to fix the ailing automaker."

Analysts caution Ford may be living beyond its means. The company’s cash flow no longer covers the quarterly dividend, Berenberg analyst Alexander Haissl noted in an Aug. 6 report.
Ford’s dividend is “looking extremely fragile as cash flow from the core business continues to deteriorate at a rapid pace,” wrote Haissl, who rates Ford a sell and has an $7 price target on the stock.
Bloomberg Dividend Forecast analysts see the automaker cutting its quarterly payout to 11 cents, while Morgan Stanley projects the dividend will be slashed in half by next year.
Morgan Stanley’s Adam Jonas, who rates Ford the equivalent of a buy, contends the automaker needs to retain cash to strengthen its balance sheet as it prepares to spend on its restructuring. The fact that management insists they won’t do that means Ford may be willing to pay the dividend even if the company burns cash, Jonas wrote in a July 31 report

https://www.bloomberg.com/news/arti...-street-s-calls-for-dividend-to-be-pared-back

"This is an open field, which in our view could go from working with Ford or Fiat on B (small) segment cars at risk of being discontinued to merging operations with Ford in Latam (Latin America),” Jefferies analyst Philippe Houchois said."

https://www.forbes.com/sites/neilwi...light-ford-europe-fiat-weakness/#2d160eb048d8

TURIN, Italy— Fiat Chrysler Automobiles FCAU -0.85% NV’s new Chief Executive Mike Manley faces some unfinished business in Europe.
His predecessor, Sergio Marchionne, who died last month, saved Fiat and rescued Chrysler from bankruptcy by orchestrating their merger, gaining him a reputation as a turnaround specialist. But Mr. Marchionne left unresolved the future of FCA’s legacy business in Europe, including the Fiat, Alfa Romeo and Maserati brands.

Mr. Manley will have to address multiple challenges, including plant overcapacity and a bloated workforce in Europe, which accounts for 36% of FCA’s employees but one-tenth of its profits. Three-quarters of FCA’s sales in Europe are of Fiat-branded cars that have razor-thin profit margins. A successful relaunch of the sporty Alfa Romeo brand eluded Mr. Marchionne for more than a decade. Maserati provides a healthy profit margin, but the luxury marque’s volume is too small to significantly boost FCA’s overall financial results.

FCA would need a merger to improve the profitability in Europe,” said Martino De Ambroggi, an analyst with Equita.
FCA declined to comment.
Europe has been challenging for FCA and its Detroit rivals. Smaller cars dominate the European market, partly because fuel is more expensive than in the U.S. City roads are often narrower and many countries slap higher taxes on sport-utility vehicles, which are a big source of profit for auto makers.

https://www.wsj.com/articles/new-fi...-1534843800?ru=yahoo?mod=yahoo_itp&yptr=yahoo

 

[redriderbob]

I highly doubt that would happen and it sounds risky as hell. Why would a negative debt free FCA want to pick up more debt? Makes no sense. Wall Street only thinks about a share value now, not in the long run. This would be a terrible idea.

 

[AlexB]

I highly doubt that would happen and it sounds risky as hell. Why would a negative debt free FCA want to pick up more debt? Makes no sense. Wall Street only thinks about a share value now, not in the long run. This would be a terrible idea.

Actually FCA wouldn't be picking up additional debt because PSA case it comes with $8.2 billion euro net cash which is better than FCA.

With Ford Europe/South America, Wall Street expect similar terms to Opel deal with PSA. The Ford Motor Company would retain any pension liability,any debt of the units and still would need to make a payment to the buyer(FCA) all things Mary Barra did to get rid of Opel.

 

[Bili]

Actually FCA wouldn't be picking up additional debt because PSA case it comes with $8.2 billion euro net cash which is better than FCA.

With Ford Europe/South America, Wall Street expect similar terms to Opel deal with PSA. The Ford Motor Company would retain any pension liability,any debt of the units and still would need to make a payment to the buyer(FCA) all things Mary Barra did to get rid of Opel.

Buying a Ford of Europe does make sense. Buying a South American Ford is a big no.

 

[AlexB]

Buying a Ford of Europe does make sense. Buying a South American Ford is a big no.

John Elkann's grandfather nearly did purchase Ford of Europe, but negotiations fell apart over control.This time such issues won't exist:https://books.google.com/books?id=q9e4BAAAQBAJ&pg=PA130&lpg=PA130&dq=ford+Fiat+"1984"+merger&source=bl&ots=1wfl5d26qs&sig=dXCtUSBWvNle9KwmTEE4FJSt0sY&hl=en&sa=X&ved=2ahUKEwi75PC7v4bdAhUFEqwKHfVzCgI4ChDoATABegQIBxAB#v=onepage&q=ford Fiat "1984" merger&f=false

 

[AlexB]

In a FCA-owned European Ford line up...The next Focus would be a blue oval Tipo, blue oval version of Panda as well.Fiesta moves to the 500 architecture....maybe Poland production.