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Shares of Fiat Chrysler Automobiles N.V. (FCAU) return to the announcement of the signing of an agreement to sell its automotive components business, Magneti Marelli, for $ 7.1 billion.
The agreement will transfer the spare parts business based in Corbetta, Italy, to the Japanese manufacturer Calsonic Kansei, which is owned by US acquisition company KKR & Co. (KKR). The transaction will create "one of the 10 largest independent suppliers of automotive components in the world", with a turnover of more than 15.2 billion euros (about 17.5 billion euros). dollars), according to a Fiat Chrysler statement.
The deal is expected to close in the first half of 2019. Fiat Chrysler shares rose nearly 5% on Monday in pre-sale transactions, at the announcement of the deal.
Mike Manley, CEO of Fiat Chrysler, said the proposed sale "recognizes Magneti Marelli's strategic value and is another milestone in our relentless drive to create value."
The focus on value creation is enshrined in the strategy of the late CEO of the company, Sergio Marchionne. The Associated Press said that the fallout from Magneti Marelli was expected for some time, dating back to Marchionne's mandate.
Manley, who succeeded Marchionne in July, hopes the relationship between Calsonic Kansei and Fiat Chrysler will continue. The details of what this relationship might entail have not been disclosed.
Liquid in hand
What is certain is that Fiat Chrysler will receive a massive $ 7.1 billion payout to further work toward the "value creation" cited by Manley.
The increase in the company's cash flow is due to the increased emphasis on autonomous driving technologies by traditional manufacturers, including Fiat Chrysler.
FCA will provide Level 2+ and Tier 3 self-sufficiency in all markets in 2019-21 and plans to make Level 4 autonomous driving systems available to its customers by 2023. #FCAFiveYearPlan https://t.co/zPQstUiK1j
– FCA group (@fcagroup) June 1, 2018
In 2018, Fiat Chrysler stepped up its self-driving efforts with an ambitious goal: put these cars on the road. The most notable move was the partnership with Alphabet Inc.'s Waymo self-driving program (GOOGL).
"Strategic partnerships, such as the one we have with Waymo, will help propel innovative technologies to the fore," said Marchionne, then CEO.
Our goal is to create the world's most advanced autonomous driving technology on a range of vehicle platforms to make our roads safer. We are delighted with our growing partnership with FCA! https://t.co/l53nCkd8n2
– John Krafcik (@johnkrafcik) May 31, 2018
The increased ability to spend alongside well-heeled partners such as Alphabet, owned by Jim Cramer's Action Alerts PLUS Trust, is expected to provide Fiat Chrysler with the capital needed to continue this important initiative despite the difficulties of the company. 39 industry facing trade disputes and rising sales of used cars.
Cramer said the problems faced by automakers could indeed be a motivating factor for the disengagement of component activities at the present time.
"We think the combination of the need to spend for autonomous driving technology and the need to buy a new car because the old ones are too damn conspired with concerns about the trade to make cars out of reach for many, second-hand cars sell so well – and that confidence can not be invested, "said Cramer. "Every time we try, we lose, so we stay away."
Competitive advantage
Fiat Chrysler will benefit from the injection of funds as part of its partnership with Waymo against the partnership between General Motors Co. (GM) and Softbank and Ford Motor Co.'s (F) unique partnership in safety method.
It should be noted that Ford will present at the Jefferies Financial Conference a conference that will focus on technology and the evolution of older business models. On Monday morning news, investors will wonder if the contrast between the efforts of Ford and those of Fiat Chrysler will be taken into account.
Fiat Chrysler, Ford and General Motors will provide all their revenue reports before the end of the month.
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