Fiat Chrysler Shares Soar After China's Great Wall Confirms Interest

Tyler Durden's picture

Last week AutomotiveNews reported rumors that at least one Chinese automaker had made a bid for Fiat Chrysler (FCA) at a slight premium to the company's prevailing market price though it was reported rejected.  While it's unclear whether an official bid was made, this morning Reuters is confirming that China's Great Wall Motor Company has expressed interest in acquiring FCA, sending the company's shares to a new 52-week high.

China's Great Wall Motor Co Ltd is interested in bidding for Fiat Chrysler Automobiles (FCA), a company official said on Monday, confirming reports it is pursuing all or part of the owner of the Jeep and Ram truck brands.

 

"With respect to this case, we currently have an intention to acquire. We are interested in (FCA)," an official at Great Wall Motor's press relations department told Reuters by phone. He declined to give his name and gave no further details.

 

In a statement, Fiat Chrysler said it had not been approached by Great Wall Motor, and was busy with implementing its current five-year business plan.

 

The industry publication cited a Great Wall spokesman confirming interest, but saying the Chinese automaker had not made a formal offer or met with FCA's board.

Jeep

 

Not surprisingly, FCA's iconic Jeep brand, which Morgan Stanley figures is worth about 150% of FCA's overall market value all by itself, is the crown jewel the Great Wall covets.

"Our strategic goal is to become the world's largest SUV maker," Automotive News quoted the spokesman as saying. "Acquiring Jeep, a global SUV brand, would enable us to achieve our goal sooner and better (than on our own)."

 

"Jeep is the most logical choice since (Great Wall) wants to be the largest SUV maker in the world," said Yale Zhang, head of Shanghai-based consultancy Automotive Foresight.

 

Ram could be an option, but "the Jeep brand is recognized globally. I think Great Wall Motor is eyeing a global strategy, not just the United States," Zhang added.

 

Jeep, which traces its roots to the iconic World War Two military vehicle, targets sales of 2 million vehicles in 2018, up from 1.4 million in 2016. Marchionne has said deliveries from the SUV brand could eventually rise to as many as 7 million a year as demand for sporty vehicles is set to keep rising.

 

In a recent note, Morgan Stanley estimated Jeep's enterprise value at 23 billion euros ($27 billion) - nearly 150 percent of the whole of FCA's market value.

Meanwhile, with a market value of almost $20 billion, an acquisition of FCA would be by far China's largest overseas automotive industry deal - and possibly one of its largest ever overseas purchases - dwarfing Geely's 2010 billion acquisition of Volvo cars. 

And, of course, FCA shareholders are applauding the interest in pre-market trading.

FCAU

 

Interest from China comes amid a push by the government to acquire international assets in order to gain further access to markets outside
China.

A government directive dubbed China Outbound pushes Chinese businesses to acquire international assets from their industries and operate them "to make their mark," much as Geely has done since acquiring Volvo in 2010. Bloomberg reported last week that Chinese companies plan to spend $1.5 trillion acquiring overseas companies over the next decade — a 70 percent increase from current levels.

 

"Right now, Chinese automakers enjoy the full support of the leadership in Beijing to go and make it happen," Dunne said. "That's something brand new, and it's really picked up since 2015."

 

Along with Volvo, Dunne pointed to Italian tire maker Pirelli and German robotics giant Kuka as Chinese acquisitions supported by the China Outbound policy.

Of course, given Trump's focus on domestic auto production and intellectual property violations by China, something tells us this particular deal will be somewhat 'complicated' politically.

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Theta_Burn's picture

The Germans couldn't turn Jeep/Chrysler around, what makes the Chinese think they can?

 

bigdumbnugly's picture

they'll just look at it from a different slant.

Looney's picture

 

If China buys Chrysler, the next Jeep model will be a Self-Pulled Rickshaw.   ;-)

Looney

HenryKissingerBilderberg's picture

Oh I am shure MAGA americans are all waiting to buy chinese made HEMI muscle cars!!!

Xena fobe's picture

US based Chinese and other foreigners here would be enough of a market if the cars were cheap enough.  .

HenryKissingerBilderberg's picture

define cheap enough?

you mean at a loss?

mvsjcl's picture

I wonder if FCA's CEO will have to teach his replacement the ropes before being let go?

GunnerySgtHartman's picture

Actually, Chrysler was the most profitable of the US automakers on a per-vehicle basis when the Germans bought it in 1998 - then the Germans, in their "infinite Teutonic wisdom" (HARRUMPH HARRUMPH) nearly destroyed it.  The Germans lost billions on it when they sold it to Cerberus.  Jeep and Ram Truck are the only things at FCA worth anything, anyway.

Funny how Jeep has been tossed around - founded by the Americans, sold to the Germans, then sold back to the Americans, then the Italians, and now possibly the Chinese.

mtl4's picture

They can all thank Lee Iacocca for Chrysler being worth anything at all with his minivan/k-car combo back in the 1980's.

silverer's picture

CEO's with his kind of talent are mostly retired now. In those times, the CEO's saved a company by pulling off a miracle of improved productivity. Nowadays, the CEO's pull off a save through a miracle of Wall St.

gregga777's picture

No, nowadays the CEOs are all trained by American Business schools on how to get rich loading up the CONporation with debt to buy back shares, increasing EPS to increase their bonuses and self-dealing with other self-enrichment schemes.

BlindMonkey's picture

I forgot the company but on ZH a few days back an article talked about a company who's planned/obligated dividend and stock buybacks exceeded the free cash flow.  Hard to imagine that working out for very long.

ToSoft4Truth's picture

The Carter administration had the foresight to bail Chrysler out 40 years ago. 

Zorba's idea's picture

Thats it! China should revive the iconic "K" car...guarantee that'll start a trade war. 

Hal n back's picture

FCA shares did not soar-up 2% and got back part of the losses the last 10 days. After an incredible run up this year while sales were in decline.

 

SilverRoofer's picture

So instead of the DODGE Brother's

It will be the CHAN brothers in the commercials

Xena fobe's picture

As long as they can import Chinese made cars, it doesn't matter.

Justin Case's picture

The Germans couldn't turn Jeep/Chrysler around, what makes the Chinese think they can?

 

Here's yoar answer
2016
China automobiles production reached to  28.119 million
United States automobiles production reached to 4 million

Everybodys All American's picture

You're missing out on the very biggest story of the year Tylers ... Democrat IT staffer sold state secrets and way more that this story doesnt even bother with.

http://www.wnd.com/2017/08/it-staffers-sold-sensitive-data-to-foreign-in...

junction's picture

http://nypost.com/2017/08/19/it-staffers-may-have-compromised-sensitive-...

The Awan brothers started off as Pakistani ISI assets who almost certainly got recommended by Hillary Clinton's staff for their House jobs.  So these totally unqualified guys got run of the House IT operations with the backing of Clinton and the help of Wasserman-Shultz.  

Everybodys All American's picture

Can the very real possibility of treason get the attention of CNN or MSNBC? 

gregga777's picture

No. Nothing negative about the Israelis are allowed to be presented to the American People.

Berspankme's picture

Washerwoman Schultz is a particularly vile cunt

NurseRatched's picture

The Chinese will eep Ram Trucks and Jeep, soin off Alfa and Maserati, refuse to buy Fiat and send Dodge and Chrysler to the firing squad.

FCA, as a whole, is a hot mess.

Oldwood's picture

Do we have a clue what Chinese ownership actually means? It's one thing for Italians/Europeans owning Chrysler, but china plays by a different set of rules. It will reinforce what it means to be OWNED. And it will most certainly open marketing channels to Chinese made cars. Chinese care not about profits, they, like our own elites, simply want to OWN it ALL.

silverer's picture

Yes. I think I get what Chinese ownership means in this case. They will offer to buy Chrysler. The US government is all about interfering in private business deals now, in the interest of "national security" or whatever, and will want to jump in and make the deal happen the way the politicians want it to go down. Now it would be a bastardized version of a company the government already broke, and it won't work. Just like Solyndra. However, the Chinese have proven to be much smarter than US politicians time and again, and they will then back out of the deal, and then Chrysler will eventually go bankrupt, like it should have years ago. Then the Chinese can sit back, laugh under their breath, and proceed to replace the Chrysler products with home grown Chinese vehicles. Let's face it: either way, China builds the damn things.

Sandmann's picture

Geely has done a great job with Volvo

baldknobber's picture

They shouldn't be allowed to put the name Jeep on these things they sell now. At one time Jeep was a no frills functional workhorse for people that needed something other than the run of the mill. Now they are just another soccer mom gilded carriage,   because her most precious cargo is in the back seat   PUKE

TheFreeLance's picture

You can still get a stripped 5-speed Wrangler, still has solid-axles. Yeah leaf-springs are long gone, as they should be. The Cherokee is basically a Range Rover now and the rest of the models just toys.

TheFreeLance's picture

US Jeep buyers would have nothing to do with a Communist China owned Jeep.

GunnerySgtHartman's picture

Have a feeling that a lot of US Jeep buyers don't care ... look at how many people buy front-wheel-drive Jeeps, which are as far as you can get from what a Jeep really is.

Oldwood's picture

Are you kidding!

Americans are consumer whores who will buy anything from anybody....even those who are TELLING  us to our face they intend on burying us. We used to believe that communism was a virus on humanity that needed stomping out, and now line up to buy Chinese goods at the Apple store. We will happily buy the rope for our own hanging if it is priced cheaply enough. We have surrendered our jobs to ALL our former enemies, actually working extra hard to enable them. As a society we are IDIOTS. The clock is winding down.

silverer's picture

You are right! What US buyer wouldn't want to be the first on the block to own a a Yongshi Warrior or a Beijing J212?

http://truckyeah.jalopnik.com/meet-the-chinese-militarys-new-jeep-174454...

https://en.wikipedia.org/wiki/Beijing_BJ212

\/
oo

Sandmann's picture

Why not ? They buy Communist Chinese iPhones, TVs, laptops, telephone PBXs, solar panels, 

A. Boaty's picture

All your Fiat Chrysler is belong to us.

silverer's picture

"Fiat" Chrysler. You hit it on the head!

NoWayJose's picture

Worse thing Jeep did was sell itself to Chrysler. These valuations prove it!

silverer's picture

I think the deal is going to run into a "Great Wall". McCain has the US ego to uphold. Him and his fellow cadres will never let it happen. Either that or they will demand $80 an hour pay for the unions or some other ridiculous concessions. I don't know why China would want to burden themselves with a failing US company anyway. The whole system within the company is broken and was designed to fail starting in the late 1950's with the "help" of the US government. That included all US automakers who had to exist in that framework. Only Ford seems to have dodged the bullet through the last couple of hard times, mostly due to the loyalty of its workers, resulting from a better relationship with management.

Cardinal Fang's picture

So, this China Outbound program. How does it work?

North Korea threatens nuclear war, the stock market dips, and the Chinese swoop in and buy devalued assets?

Hmm.

Sounds commie-riffic!

MEFOBILLS's picture

What was Ford's goal when they acquired Jaguar?  That absorbed so much Ford energy that Ford ignored their domestic brands like Lincoln.  How about when Chrysler went on a buying spree and bought Italian brands like Maserati, then it doesn't work out, and had to be sold.  

How about when Toyota just CREATED their own brand, Lexus.  People went ahead and bought the new Lexus braded car because it had merit.  A lot of times acquisition's don't work out, because of cultural differences.  Most people can see through the "brand."  If the car is a POS, word gets out.  

Word gets out especially in the internet age, where people talk to each other.

The difference here really is economics.  China has state banks, and they pump their economy with Yuans.  These excess Yuans then have an exchange rate, and this purchasing power becomes available.  The Yuan is looked upon favorably due to the new silk road, and managment of Chinese economy.  Yuan's are considered safe. 

Notice that it is government planning that is compelling Chinese automakers to look outward.  

The Chinese have excess purchasing power in the same way bubble 90's gave U.S. automakers excess purchasing power. 

___________

"Our strategic goal is to become the world's largest SUV maker," Automotive News quoted the spokesman as saying."Acquiring Jeep, a global SUV brand, would enable us to achieve our goal sooner and better (than on our own)."

 

Sandmann's picture

Ford bought Jaguar to stop GM getting it. Ford had tried to buy BMW but the Quandt Family told them to Foxtrot Oscar. Ford bought Volvo and messed up. It has never been able to take the Ford brand upmarket and today in the UK and Germany  BMW 3 Series is about as common as Ford Cortina/Taunus were in the 1970s.

sinbad2's picture

A lot of the European brands were bought by GM and Ford, to get the technology, once they got the knowledge, they destroyed the companies they had bought, as a way of getting rid of the competition. Volvo and Saab built fine cars, until GM and Ford got hold of them.

But it's not a new thing, GM bought up and destroyed most of Americas carmakers, competition is the enemy of capitalism.

Sandmann's picture

Strip the Dealerships from the Manufacturing and spin off the Chrysler factories. 

Xena fobe's picture

Cars are probably 99% Chinese parts already.  The difference is the mfg reputation.  With Chinese reputation for cutting corners, I won't be risking my life on a Chrysler.  But many will

sudzee's picture

Plastic shit exchanged for iconic brands. Make Amarica great again. Also need to buy chinese navigational systems as US navy destroying itself. The world is laughing while the evil empire implodes as "FED" "FED" "FED" bullshit diverts everyones attention from reality.

ToSoft4Truth's picture

Red-folk sold Manhattan for beads....  White-folk sold Manhattan for beanie babies. 

Berspankme's picture

Great Wall has been assembling Jeeps for many years already.

ToSoft4Truth's picture

Will the new UAW slogan be....  "Buy Chinese"?