CAMBRIDGE, England – Chrysler is finding new markets for its cars like the 300C in Europe thanks to its Fiat connections, but sales are very small compared with the home market, and some investors are looking away from the product and hoping the Italian company will soon throw caution to the winds and buy all the shares in the U.S. company it does not yet own.
Chrysler launches its redesigned 300C in Britain in June and expects to sell only about 750 in a full year. The 300 is also going on sale across Europe badged as the Lancia Thema, a storied but currently lame Fiat brand. Fiat sells the Freemont small MPV, a rebadged Dodge Journey, and the Lancia Voyager large minivan version of the Town and Country.
Fiat currently owns 58.5 per cent of Chrysler and Bernstein Research of London said it should think seriously about mobilising enough cash to buy the rest of the shares so it can use all of the U.S. company’s cash flow.
Fiat CEO Sergio Marchionne has said there is a more than 50 per cent chance that Fiat will buy another 3.3 per cent of Chrysler in July from the VEBA retiree healthcare trust, which owns the rest of the shares. It has the right to buy a maximum of 3.3 per cent every six months until 2016.
“At present, it (Chrysler) has little value to Fiat – despite the investment of time and money, it yields nothing in cash terms, apart from providing a route to market for a few Fiat 500s and some extra Giulietta platforms. Fiat needs a stake of over 80 per cen
t before it can access Chrysler’s precious cash flows. That must surely be the goal now,” Bernstein analyst Max Warburton said.
Warburton said Fiat has enough money on its balance sheet to complete the Chrysler purchase, and if it didn’t, selling some of its Ferrari luxury sports car subsidiary would fund the deal.
Warburton upgraded his rating of Fiat shares to “Outperform”, with the proviso that some investors might think this reckless during the deepening Eurozone crisis.
“We can’t put lipstick on a pig, but we believe (Fiat’s) European losses have stabilised, absent a further Eurozone crisis, we don’t see much downside for Italian and wider European car sales and Brazilian margins have stabilised, at least for 2012. Brazil is still the major risk factor,” Warburton said.
Meanwhile the Chrysler 300C will have to fight for sales from the BMW 5-series, Audi A6 and Mercedes E class on their home territory. That’s a big ask, but the new 300 has its stunning, head-turning good looks going for it. European versions have three engine options. There are two 3.0 liter V6 diesels developing either 233 hp or 187 hp, and a Pentastar gasoline V6. Prices start at the equivalent of $55,500 for the Limited and $61,600 for the Executive, after tax. Considering that U.S. prices start at just under $29,000 before tax, that represents a very attractive profit margin, so perhaps a seemingly unambitious sales target can still return big profits.