LUCA CIFERRI

With Chrysler, Marchionne has masterminded a great deal for Fiat

Luca Ciferri is chief correspondent at Automotive News EuropeLuca Ciferri is chief correspondent at Automotive News Europe
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With another of his typically fast decisions, Sergio Marchionne agreed late Thursday to buy a 6 percent stake in Chrysler from the U.S. Treasury, for $500 million.

The immediate consequence of this action, based on a call option exercised just a week before – on May 27 – is that, once all the paperwork is out of the way, Fiat will have a 52 percent majority stake in Chrysler.

At this point, consolidating Chrysler results into Fiat's becomes an obligation, no longer just an option.

In terms of global sales, Fiat-Chrysler would have ranked as the world's eighth-largest automaker by unit sales last year, with a combined volume of 3.58 million units. It would have been behind PSA/Peugeot-Citroen, which sold 3.6 million units, and ahead of Honda Motor Co., whose sales were 3.56 million.

This year, Fiat-Chrysler has a good chance of making seventh place in the sales rankings. Marchionne has already outlined plans to sell at least 2.2 million Fiats and 2 million Chryslers this year.

And the potential market value of Fiat-Chrysler?

Fiat S.p.A.'s market capitalization at the moment is 8.8 billion euros ($12.7 billion), while Chrysler is not listed.

To try and value the automaker, you need to look at the two most recent official valuations of Chrysler resulting from Fiat's purchase of shares.

When it bought a 16 percent stake on May 24, Fiat paid $1.27 billion, suggesting a value for Chrysler as whole of $7.92 billion. Thursday's transaction ($500 million for a 6 percent stake) suggested value grew to $8.33 billion.

However, it is likely that Chrysler is worth much more than $8.33 billion (5.75 billion euros).

Just consider this: a potentially merged Fiat-Chrysler would represent a group with revenues of 75 billion euros this year, but with a combined market capitalization of about 14.5 billion euros.

Fiat alone plans revenues of 37 billion euros this year and is valued by the financial markets as being worth 8.8 billion euros.

Applying the same multiple to a merged Fiat-Chrysler, would give a market value nearer 18 billion euros.

Time will tell how much Fiat-Chrysler is worth, but so far it looks like Marchionne has masterminded a great deal for Fiat -- and also saved the third-largest U.S. automaker from oblivion.

You can reach Luca Ciferri at lciferri@crain.com.

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