A longtime investor is urging Fiat Chrysler Automobiles (FCA) to sell some of its European brands to focus on the U.S. brands that generate most of its profits. In addition, the investor also wants the auto conglomerate to consider merging with General motors or possibly Ford.
The open letter to FCA's board came from ADW Capital Management, where founder Adam Wyden notes that 95% of FCA's profits are generated in North America, primarily from Jeep and the Ram truck division. It recommends the automaker to look into spinning off the Maserati and Alfa Romeo brands to better concentrate on its American businesses. Merging with Ford, or especially GM, meanwhile, would allow for billions in savings through factors such as shared platform development, better leveraging of operating expenses, and optimized manufacturing investments, Wyden argues.
The suggestions are meant to raise FCA's share price, which Wyden describes as undervalued compared to its Detroit rivals.
Though stock prices dropped since July, when Mike Manley replaced the deceased Sergio Marchionne as CEO, Bloomberg notes that FCA shares have done well over the longer term – more than tripling since 2014. In addition, company profits have more than doubled in the last five years.
A spokesman for FCA declined to discuss the letter, but pointed to comments Manley made in a conference call to analysts on Oct. 30, when the new CEO said the company's five-year business plan calls for it to remain independent and that the recent multi-billion dollar sale of component maker Magneti Marelli put it in a strong position. FCA is controlled by the Agnelli family, which has more than 50 percent of voting rights in the Italian-American conglomerate through a holding company.
ADW is not one of FCA's 100 largest shareholders, Bloomberg notes, but it has held the automaker's stock since 2014 and the equity represents the greatest single holding in its $150-million portfolio. Last month, ADW urged another of its holdings, software provider PAR Technology, to pursue a sale.