Fiat Chrysler (FCAU) Q2 2016 Earnings

Fiat Chrysler (FCAU) CFO Richard Palmer highlighted their partnership with Google

“FCA entered into an important collaboration, the first of its kind for an auto manufacturer with Google, regarding the integration of Google’s self-driving technology into the Chrysler Pacifica, which is an important move I think for FCA showing our being evolved upfront in this type of technology application.”

Allocating more manufacturing space to trucks and SUV’s while de-emphasizing lower margin cars

“Our NAFTA capacity realignment, we’ve spoken about before, regarding reorganization of some of our manufacturing footprint in the U.S. is proceeding on schedule. And will result in us having increased capacity allocated to Jeep and Ram from the middle of next year.”

Impact of Brexit on the business is minimal

“I think our exposure in the U.K. is fairly limited, on the balance sheet very limited. In terms of volumes, we sell about 100,000 cars and LTVs in the UK, obviously the 8% I think weakening, something like that, sort of stabilize that, sterling to euro, we’ll have an impact if it sits there through next year. This year we do have some hedges in place et cetera. So I think that the impact for this year is going to be minimal. So in terms of the localized impact related to the UK, not that significant.”

Fiat Chrysler (FCAU) CEO Segio Marchoinne explained his thinking on not yet committing a large amount of capital to an autonomous driving methodology

“I can only give you my views and I think it’s up to you and the markets to judge as to what is the wiser course. But I’ve stated this publicly and I’ll repeat it here again, that I think that it’s a world that is rapidly changing, and where preferences which are being expressed by existing or potential intruders into the auto space, keep on changing at the speed of light. And I think that one of the worst things we could do is to commit capital in a very certain unequivocal fashion to a particular technology choice, or a particular strategic platform without exploring potentials for development with a variety of actors. And I think we remain open as we have been, as we stated in private discussions with some of these so-called intruders and even in public assertions that the group has made. But the fact that we are willing to explore alternatives without expending a phenomenal amount of capital for us to try and understand what the ultimate economic model looks like. Because it is not just a question of exploration and capital permits when it’s a question of understanding what the economics look like after we finish. We are and have been historically manufacturers of cars out of a very traditional industry. This is a completely different way in which the market is going to be potentially developing. And I think we need to be open and not prejudicial in making choices. And so the Google experience hopefully will not be the last experience with a so-called intruder. I think it’s way too early to call today and it’s way too early to make large capital commitments for something which we have limited knowledge of and we understand little of in terms of future development.”

The Jeep brand is admired in the Chinese market

“I think the acceptance of both the Cherokee and the Renegade in China so far has been quite good. And I think it is confirming our expectations, that the Jeep brand has phenomenal traction in that country. We now having achieved local production, I think we are in a position to be fully competitive in the Chinese market. I think, we need to wait. I think that our ambitions to sell 500,000 jeeps in China by 2018 remains unchanged.”

 

Fiat Chrysler (FCAU) Q1 2016 Earnings Call

Fiat Chrysler (FCAU) CEO Serio Marchionne said the company will be focusing on trucks and SUV’s while placing less focus on cars

“I think you’ll see a lot more SUVs of a variety of calibers occupying what has historically been a passenger car market. And so in that part of the market it’s gotten sticker.  On the passenger car side, I think, the call that we made to exit those business as a producer in the United States in hindsight was probably one of the best calls we’ve made.”

Fiat Chrysler (FCAU) CEO Serio Marchionne continues his industry call to arms for auto manufacturer consolidation to improve efficiency 

“I think that this realignment of the NAFTA portfolio, to be perfectly honest, was a direct consequence of the fact that we started focusing on the relevant portion of our activities and sort of abandoned the notion of being able to withstand mediocre performance of some segments, simply because of the fact that it was due to a higher calling of being an auto maker.  And I think we have all learned, I think, inside the house at senior leadership level and working our way down the structure, as to the importance of capital usage and I think that discipline is going to benefit all of us going forward.  Having said this, I’ve remained hopeful that over a relatively reasonable period of time that, this industry will come to risk with this issue and tackle them intelligently. I think we laid out a roadmap for that to happen. I remain hopeful that somebody will pick it up with us and get it done.”

Fiat Chrysler (FCAU) CEO Serio Marchionne said the regulatory environment is making it harder for them to do business

“A couple of general comments about the regulatory environment and then we’re not getting into details. I think we have been incredibly clear over the last number of quarters about the fact that the regulatory environment has become a lot more stringent and I think that the requirements in positions that are being made and I think reasonably so on auto makers are going to increase the cost of doing business for all of us.  And it’s something that we need to understand. I think we need to understand even in terms of the accrual rates with which we are provisioning for eventual remediation cost, whether it be warranty or recalls or otherwise on any unit that we sell.”

Fiat Chrysler (FCAU) CEO Serio Marchionne described why he’s pulling back on advertising 

“I think we’re being incredibly selective about where we’re pumping our money on the advertising side. I think we went through an inordinate effort in the first seven years of our lives to try and get credibility back into the marketplace. And I think advertising was a tool that was used extensively and effectively I think between 2009 and now. I don’t think we need to over-commit as we have done in the past, but I think you’ll see more discipline coming through.”

Pricing in the passenger car business has been unacceptable

“I think we have seen a lot of competitive pricing on the passenger car side. I mean that’s the one that to me is – I hate to say that we were right in predicting the shrinkage, but there’s no doubt that there’s an oversupply of nameplates and of willing players into that marketplace, which is driving pricing to levels that we would have found unacceptable in the medium-term to long-term.”

Fiat Chrysler 4Q15 Earnings Call Notes

Fiat Chrysler Automobiles NV (FCAU) Sergio Marchionne on Q4 2015 Results

We are not of the view that this industry is facing impending demise

“We are not inside FCA of the view that this industry is facing an impending demise and I think that part of this presentation today is designed to provide you with some comfort that we have appropriate or adequate controls over the strategic development of those business that we do feel that we will be able to navigate through these rough waters and that we will come out of this process as better organizations.”

Need to move from auto making to the business of transportation

“But I think that ultimately trying to move the discussion the way from the concept of auto making, trying to re-pitch our future as being involved in the transportation business in the broadest sense of the term we doesn’t do much service to the sort of needs and objectives of the sector that it faces today.”

The Brazil market lost 1m cars

” the 7 million number was a number that was substantiating or supporting a view of markets as we saw them back in May 2014, we have readjusted all of our plans to reflect current market conditions. We have seen the Brazilian market which was expected to perform much, much better, lose over 1 million cars in less than 18 to 24 months which has had pretty significant impacts on our volume ambitions. So we have recast all those. We are going to stay away going forward from enunciating goals that relate to volumes ”

Development portfolio in the US driven by the regulatory environment

“I have always viewed the development of our portfolio in the United States as being already driven by the regulatory environment and this by the need for all of in the market to achieve the 2025 standards and to achieve the greenhouse gas emission targets that we have all signed up to.”

Autonomous technology is probably going to come from an efficient supplier base

“I am absolutely convinced that all the things that have been talked about by other industry participants will effectively materialize over a period of time and I am absolutely convinced that the relevance of the automaker in that process is not going to be as key as it has been historically in terms of the development of the automotive sector. We are going to have to rely by necessity in efficient supplier base and there is one which continues to break barriers and continues to provide solutions which are going to be available to us and to others. ”

We have to ask ourselves what is the value of a brand in the autonomous paradigm

“one of the questions that we all have to ask ourselves is what is the value of a brand in the presence of autonomous driving if effectively at the end of the day, it is not the driver that effectively exercises control and the way in which that reflects itself in margins and positioning and the relevance of the brands in the marketplace is an unknown issue. ”

The industry has historically done a good job of distracting itself from its primary function: making good cars

“And so we need to be very, very careful that we don’t spend – we have done, by the way, this industry has done a tremendous amount, if you look at its – even its recent past, it has always looked for ways to sort of defocus its primary function of making cars and making them relevant in the marketplace by looking for ancillary side solutions and somehow we will change the paradigm. ”

I do agree that we are at top-ish volumes, but 16m would be too bad

“I do subscribe to the notion that we are looking at top-ish volumes today. The rate of adjustment is unknown. I also know that there is a phenomenal amount of allowed amplitude and the isolation of volumes. I mean, if we went to 16 million, it’s not going to be the end of the world in terms of size and I think that we will all adjust to reflect those market conditions.”

More than half our fleet in the US should come from hybrid in the medium term

“In the medium-term I’d say more than half of our fleet in the United States is going to be in some form of hybrid. Calling the right time for the conversion is difficult to tell.”

There’s always something to monetize

“There are things that I can monetize. I mean, including my office chair, the question is do I need to do that. And the plan is calling for a €5 billion cash holding by the end of 2018. I think you guys should be asking for distributions and that point of time is opposed to my – worrying about monetizing assets.”