Fiat Chrysler Spins Off Ferrari Brand
Jeff Gilbert
2012 Ferrari 599 GTB Fiorano (credit: Ferrari S.p.A.)
LONDON (WWJ) – As Fiat Chrysler Automobiles seeks to raise money to fund its growth plans, the company’s board of directors has decided the high-end Ferrari brand was expendable, and will spin it off into its own company.
“I am delighted to have taken this additional step in the development of FCA,” said Fiat Chrysler Chairman John Elkann. “Coupled with the recent listing of FCA shares on the NYSE, the separation of Ferrari will preserve the cherished Italian heritage and unique position of the Ferrari business and allow FCA shareholders to continue to benefit from the substantial value inherent in this business.”
The spin-off is expected to take part over the next year.
“The separation will be effected through a public offering of FCA’s interest in Ferrari equal to 10% of Ferrari’s outstanding shares and a distribution of FCA’s remaining Ferrari shares to FCA shareholders,” read a company statement. “The Board authorized FCA management to take the steps necessary to complete these transactions during 2015. FCA expects that the Ferrari shares will be listed in the United States and possibly a European exchange.”
Ford followed a similar strategy in its turnaround, spinning off brands like Volvo, Jaguar, Land Rover and Aston Martin, to concentrate on the core Lincoln and Mercury brands.
“What Fiat is doing today is very similar to that,” said IHS Automotive analyst Mike Robinet. “They’ve decided that re-investing in Ferrari is not part of their long-term mission, therefore allowing it to become a separate company, and the market to determine its fate.”
The spin-off, Robinet says should not impact Ferrari’s ability to design and build exclusive sports cars.
“Ferrari in many respects has been a separate company for several years,” he said. “It certainly has its own development capability, its own manufacturing capability and its own dealer network.”
A dispute over the future direction of Ferrari lead to the departure of the brands long time CEO, and Fiat Chrysler CEO Sergio Marchionne’s decision to personally take charge of the brand. Marchionne says he will remain Ferrari CEO after the spin-off.
In the past, Marchionne had resisted the idea of selling or spinning off Ferrari. But, in announcing the decision, he said he felt it was in the best interest of Fiat Chrysler shareholders.
“It is proper that we pursue separate paths for FCA and Ferrari,” he said. “The Board supports management’s determination that this transaction represents FCA’s best course of action to support the long-term success of the Group while at the same time substantially strengthening FCA’s capital base.”
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