Fiat Chrysler crowns merger with Wall Street debut


Fiat Chrysler Automobiles made its Wall Street debut to great fanfare on Monday, shifting the carmaker's center of gravity away from Italy and capping a decade of canny dealmaking and tough restructuring by CEO Sergio Marchionne.

Trading under the ticker FCAU, Fiat Chrysler's shares opened at $9 in New York, up from a Friday close for the predecessor company Fiat of $8.7, and rose to as much as $9.55 in early trading. In Milan, where the company will keep a secondary listing, shares rose more than 4 percent during the session and were up 0.9 percent at 1440 GMT (10:40 a.m. EDT).

The world's seventh-largest auto group has sought the U.S. listing to help to establish itself as a leading global player through access to the world's biggest equity market and the cheaper, more reliable source of funding it ultimately offers.

"Our listing today on Wall Street is the culmination of 5½ years' work to achieve an extraordinary union,'' Marchionne said. "Today marks the beginning of our journey as one global automaker, one FCA.''

Fiat Chrysler CEO Sergio Marchionne
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Fiat took management control of bankrupt Chrysler in 2009 and completed its buyout this year. It is now combining all of its businesses under Dutch-registered FCA, which will have a U.K. financial domicile and small London headquarters, with operations centers in Turin and Detroit.

But Marchionne has picked a difficult moment to woo U.S. investors. Analysts think the U.S. auto industry is nearing a peak, while Europe is struggling to recover from years of decline and growth in China and Latin America has slowed.

"Only those willing to accept the risks of a highly leveraged turnaround situation in a competitive, capital-intensive, highly cyclical industry should consider investing,'' Richard Hilgert, an analyst at Morningstar, said in a note.

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Marchionne will ring the closing bell at the New York Stock Exchange on Monday to mark the milestone for the 62-year-old chief executive who revived one of Italy's top companies and helped rescue Chrysler along the way.

Wall Street is the first item on an ambitious agenda for the next five years as Marchionne gears up for the launch of dozens of new models, from funky Fiat 500s to sporty Maseratis.

The target is a 60 percent boost in sales to 7 million vehicles and a fivefold increase in net profit to as much as 5.5 billion euros ($6.9 billion) by 2018—the year Marchionne has said he would step down as CEO after seeing through his plan.

FCA's growth plans won't come cheap, though, and Marchionne will need to be at his persuasive best if analysts are right with predictions that the group will need to raise more capital to pay for his 48-billion-euro investment plan.

Detroit power struggle

In comparison to GM and Ford, FCA is seen as less attractive because of its aging model lineup, high debt, weaker margins in North America and its small presence in China.

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"Ford and GM also offer much stronger cash generation and balance sheets, and are thus in a position to return cash to shareholders, while FCA still needs to raise capital,'' Exane BNP Paribas analyst Stuart Pearson said in a note.

FCA will decide on future financing options this month, though Marchionne insists it does not need a capital increase.

But some analysts think FCA is a good long-term bet because of its potential in the fast-growing premium segment of the market with brands such as Alfa Romeo, Ferrari and Jeep.

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"Jeep's re-entry into China will provide Fiat with a turbo boost to its share of the market,'' Morningstar's Hilgert said.

One U.S. investment banker said the true test would come once it seeks to access U.S. capital markets. "Now would be the worst possible time to ask investors for money,'' he said.

John Casesa, senior managing partner at Guggenhei Securities, said investors would need to weigh the prospects of huge cost savings from integrating Fiat and Chrysler, with the risk that the autos market peaks in the next few years.

Marchionne hopes to see more than half of FCAU's stock changing hands in New York instead of Milan, but appetite will take time to build, especially as the company has yet to switch to U.S. accounting principles and to reporting results in dollars.

During the first hour of trading, more than 1 million shares were traded in New York and around 5 million in Milan. Fiat's average for daily volumes over the past 30 days were 17.5 million.

Marchionne will hit the road next month to spread the word. FCA may also sell treasury shares and other stock after the listing in an attempt to boost trading volumes.

The CEO believes FCA's cause will be aided by Chrysler's brand strength in the United States, now the main profit center for the combined group. FCA sold more cars in North America last month than Toyota, the world's largest automaker.