Fiat Chrysler heads for Wall Street, schooled by struggling sister truckmaker

Fri Jun 27, 2014 11:36am EDT
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By Agnieszka Flak

MILAN (Reuters) - Sergio Marchionne needs a New York stock market listing to bring in the investors required to fund future growth at Fiat Chrysler, but a lukewarm response to the chief executive's most recent Wall Street launch suggests he has a bumpy journey ahead.

Fiat FIA.MI expects to finalize the merger with its U.S. unit Chrysler this year. Marchionne plans an October listing in New York for Fiat Chrysler Automobiles (FCA) to help foot the bill for his 48 billion euro ($65 billion) spending plan to grow net profits five-fold and sales by 60 percent within five years.

Fiat shares currently trade in Milan, where they will be replaced by FCA stock. But it is a Wall Street presence that would give the world's seventh-largest car group access to wider equity and debt sources to fund the investments it needs to rival Germany's Volkswagen (VOWG_p.DE: Quote) and BMW (BMWG.DE: Quote) in the premium segment, particularly in the tough European market with its fragile economy and over-capacity in mass-market brands.

However, FCA must first solve a conundrum: it needs U.S. investors to trade the stock in order to create enough liquidity to make it a usable asset - but the investors won't come until it can offer a stock with high trading volumes.

And last year's Wall Street listing of sister company CNH Industrial (CNHI.N: Quote) (CNHI.MI: Quote) provides little encouragement.

Eight months on, only around 100,000 shares in the truck and tractor maker - created by tying up Italy's Fiat Industrial with U.S. holding company CNH Global - are traded on average daily in New York. 30-day average trading volumes of its Milan secondary listing are 30 times higher, Thomson Reuters data show.

Marchionne, also CNH Industrial chairman, acknowledged the difficulties, and suggested he was prepared for a long haul with both CNH and Fiat Chrysler.

"We need to spend a lot more time in the street talking to investors to try and get them buying in Europe and then trading in the U.S.," Marchionne said last week. "It'll take 2 or 3 years to get it done properly. FCA has got the same issue."   Continued...

Fiat Chrysler CEO Sergio Marchionne answers questions from the media during the FCA Investors Day at the Chrysler World Headquarters in Auburn Hills, Michigan May 6, 2014.    REUTERS/Rebecca Cook