Fiat sells Magneti Marelli

A desperately awaited €6.2 billion injection of funds may finally have unblocked Fiat Chrysler’s new product pipeline.

FCA has announced it is selling its electronics and technical parts offshoot, , to KKR’s Calsonic Kansei operation, which will become a new entity called Magneti Marelli CK Holdings.

It marks the first major move by new CEO Mike Manley after his sudden elevation to the top job following the shock death of financial wizard, Sergio Marchionne.

FCA has agreed to keep buying parts from the new outfit, which will become one of the world’s top 10 automotive suppliers by revenues, and its headquarters will remain in Corbetta, in northern Italy.

The new operation will combine for about €15 billion in annual revenues, with Manley steering a course around distributing Magneti Marelli shares to current FCA shareholders and floating it on the Milano stock exchange – both options favoured by his predecessor.

However, FCA admitted the discussions for the Magneti Marelli sale began under Marchionne’s watch but the two parties were about €950 million apart.

“Having carefully examined a range of options to enable Magneti Marelli to express its full potential in the next phase of its development, this combination with Calsonic Kansei has emerged as an ideal opportunity to accelerate Magneti Marelli’s future growth for the benefit of its customers and its outstanding people,” Manley said in a statement.

“The combined business will continue to be among FCA’s most important business partners and we would like to see that relationship grow even further in the future.

“The transaction also recognizes the full strategic value of Magneti Marelli and is another important step in our relentless focus on value creation.”

The concern some automotive observers have felt is that FCA could be tempted to pay a big chunk of the sale funds in dividends, a move that would profit its Chairman, John Elkann, and his Acor family fund significantly.

The Fiat brand has seen its share of the European market slip from more than 35 percent in the 1980s to less than four percent today, and its current product line up is aging and technologically off the pace of its European and Asian rivals.

It relies on the 500 for the bulk of its profits, yet the 500 hatch is more than a decade old and has never had a significant visual facelift, though it has become a sub-brand with the 500X and the 500L.

The Tipo sedan and wagon is essentially a rebodied Bravo, the Punto is even older than the 500 and the Panda is seen as a solid, no-nonsense car that doesn’t produce a lot of profit per car.

Maserati hasn’t fulfilled Marchionne’s expected sales surge, despite three relatively new models, while Alfa Romeo’s rebirth has had mixed results.

Once-great Lancia has been reduced to an old one-model brand, and even then it’s only sold in Italy.

FCA has relied on Jeep and RAM for profits and is yet to release a hybrid, plug-in hybrid or battery-electric model, despite the looming monster of EU7 emissions laws in 2020.