The spinoff leaves Fiat Auto with a greater freedom to maneuver for future alliances, including closer integration and possibly even a full merger with Chrysler Group.
But at the same time Fiat's auto operations will be financially transparent from now on. In the past the parent group's accounting complexity largely hid the poor performance and the exact debt of the automotive operations.
Fiat Auto will burn through 1.8 billion euros ($2.35 billion) in cash this year, it was revealed at Thursday's shareholders meeting held to approve the spinoff. Most of its small operating profit this year is coming from the company's booming business in Brazil.
CEO Sergio Marchionne expects the European market to remain depressed at least until the first quarter of next year. Fiat is weak in India and Russia, and is still nowhere in the world's largest auto market, China.
As its cash burn won't stop soon, it's hard to imagine how Fiat Auto will finance 16 billion euros in investments it is planning in the next four years to increase its global unit sales to 3.8 million in 2014 from 2 million units planned this year.
The prevailing view is that Fiat is saving a badly struggling Chrysler, in which Fiat has management control and a 20 percent stake. But I wonder if, after the spinoff, the opposite might happen: Could Chrysler save Fiat?
There are three reasons for this view.
1. Chrysler's product pipeline for the next couple of years is broader than Fiat's in terms of the number of new models coming and their scope.
2. Chrysler is generating cash even in a still very weak U.S. market where it sells an aging product range. Fiat Auto is burning through roughly 150 million euros in cash a month.
3. Chrysler has a strong relationship with the United Auto Workers union and the possibility to quickly increase production if there is a surge in demand. Fiat wants to increase output in Italy to 1.4 million units in 2014 from 650,000 last year. But the company is making little progress in tackling poor productivity and labor conflicts in its domestic plants.
Marchionne has dreamed of spinning off Fiat's auto business since he was appointed CEO in 2004. Time will tell whether the dream turns into a nightmare.