Fiat paln to speed up Ferrari float?---------------

http://www.timesonline.co.uk/newspaper/0,,2769-1512213,00.html

 

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The Sunday Times - Business



March 06, 2005

Fiat speeds up at end of long winding road
The carmaker may float Ferrari and will use a £1bn windfall to boost its Maserati and Alfa Romeo marques. Report by Ray Hutton



AT the Geneva Motor Show last week Karl-Heinz Kalbfell was wearing two pin badges, one on each lapel.
The silver trident symbol of Maserati and the circle with the heraldic emblems of Milan that signifies Alfa Romeo are an indication of the responsibility that rests on his shoulders. Kalbfell is the German who has to steer two of Italy’s most famous car brands into a profitable future.



He has the credentials: for most of his career Kalbfell has been with BMW, and he was until last autumn the chairman and chief executive of Rolls-Royce, the luxury British car marque now owned by the German automotive group.

Motor-industry observers were surprised when he left the stately calm of the Rolls-Royce factory at Goodwood, West Sussex, to head the Alfa Romeo division of Fiat Group.

The move should not have been that much of a surprise, however. Kalbfell, after all, set up BMW’s successful M performance subsidiary and describes himself as a “high- revving kind of guy”.

What he didn’t know when he joined Fiat at the beginning of this year was that within two months he would also be in charge of Maserati, and have the task of joining it with Alfa Romeo to produce a wide range of cars as a spirited Italian alternative to BMW.

Maserati is on the rebound from Ferrari. The two companies, which were once great rivals on the racetrack, were brought together in 1997 under the management of Luca di Montezemolo, who is now chairman of the Fiat Group.

Neither luxury marque is in the peak of financial health. Maserati, which made 4,600 cars last year, is far from profitable, and Ferrari, which produced 4,900, has seen a reversal of its former profitability because of the weak dollar and the high cost of maintaining its dominance in Formula One racing. Ferrari is 56% owned by the Fiat Group but is not part of the heavily loss-making Fiat Auto, the group’s high-volume car-making operation.

Last month General Motors (GM) agreed to pay Fiat $2 billion (just over £1 billion) to extract itself from a disastrous agreement struck in 2000 at the height of the industry’s merger mania. GM took a 20% stake in Fiat Auto (later reduced to 10% by a capital increase at Fiat) and granted the group a “put” option that would have required the Americans to purchase all of Fiat Auto if the Italians so wished.

Various joint ventures between the two are now being dismantled and Fiat Group has taken back GM’s shareholding in Fiat Auto. Fiat finance officials said in Geneva last week that the company was likely to book a €1 billion (£687m) one-off profit from the unwinding of the joint venture thanks to the payment by the Americans.

Freed of the GM tie, Fiat was able to link Maserati with Alfa and leave Ferrari to its own devices. Analysts jumped to the conclusion that Ferrari would be floated on the stock market. The brand is one of the most valuable in the automotive world and a sale would provide the parent company with much-needed cash for restructuring.

But Fiat sources say a float or sale of the prestigious marque is not imminent and that the group might even buy back the 15% of Ferrari held by Mediobanca, the investment bank with which Fiat has had a long association.

Maserati now becomes a separate company within Fiat Group. Martin Leach, its British managing director, not long recruited after leaving Ford of Europe in acrimonious circumstances, found the prospect of working in Modena but being directly responsible to Fiat’s headquarters in Turin unpalatable and left. Kalbfell was given the job of chief executive of Maserati in addition to his role as chief operating officer of Alfa Romeo within Fiat Auto.

When it was suggested that this would be complicated, with Kalbfell holding different positions with two companies in the group, the parent company’s chief executive, Sergio Marchionne, said: “It’s absolutely not a problem; we own 100% of both companies.”

Whatever the internal politics and finances, Kalbfell sees a good fit between the Alfa Romeo and Maserati ranges of cars. He regards the £74,550 Quattroporte luxury saloon as the essence of the new Maserati, the equivalent of the 7- series in the BMW range.
There is a £25,000 gap to be exploited between the cheapest Maserati Coupé and the most expensive Alfa 166. Most likely to fill that space are superior Alfas rather than lesser Maseratis. Kalbfell believes it is important for Maseratis to remain rear-wheel-drive cars and will continue to buy the engines for the cars from Ferrari. It is probable that the next generation will include a four-wheel-drive sports utility vehicle along the lines of the BMW X5 or Porsche Cayenne.
Whether distributors and dealers will be shared will depend on individual cases, but Marchionne, an Italian-Canadian, is keen for Alfa Romeo to return to North America as soon as possible. Maserati is already there.



Kalbfell’s first goal is to improve Alfa Romeo sales in Britain where he believes it is seriously underperforming. His medium-term global targets (for the next four to five years)are 10,000 cars a year for Maserati and 300,000 for Alfa Romeo (last year it sold 175,000 worldwide).

Alfa Romeo presented two new models at the Geneva Motor Show that give the marque its best chance of revival for some years. The Alfa 159 is the replacement for the 156 saloon, a bigger car built on the so-called premium platform that was jointly developed with GM. Alfa has sole use of this platform, which can be front or four-wheel drive, as GM decided that it was too expensive for the replacement of the Saab 9-5.

The Brera 2+2 sports coupé has the same basis, and both models have a new range of petrol engines, which originated at GM, and diesels that were developed within Fiat. The split between the two companies will not affect the supply of engines and other components that they developed together.

The settlement with GM sparked an extraordinary couple of weeks at Fiat. The company placed advertisements in Italian newspapers headlined “Dedicated to Italian fans” with the message: “This is an important day. Fiat is now ‘all- Italian’ again.”

Four days later Marchionne fired Herbert Demel, the Austrian chief executive of Fiat Auto. Demel, who was once the head of Audi, has a quiet, methodical style. He had been at Fiat for just over a year.

Marchionne, renowned as a company turnround specialist, was impatient with the speed of progress and assumed the role of Fiat Auto chief executive himself.

He said: “Fiat Auto is the only company in the group that lost money in 2004, so the top management has to take direct responsibility for the problem.”

Fiat Auto made an operating loss of €96m in the fourth quarter of 2004, barely changed from the €96m loss recorded in the same period the year before. The size of the losses disappointed investors, as analysts had forecast that the division would cut its deficit by roughly one-third. Marchionne told analysts: “Fiat Auto needs to be snapped out of its stupor and slapped back into reality.”

According to Marchionne, Fiat Auto will break even in 2006 and make an operating profit of between 2% and 4% in 2007.

Separately, he said that he would come up with a programme to cut more “non-core” costs at Fiat Auto within 60 days.

Marchionne said at the show that he was keeping all his options open in discussions about another strategic partnership for Fiat.

“Now the field is completely open. After having solved the problems with General Motors, the future is ours.”