Let’s say you own a gleaming new Ferrari 458 Italia. It’s your baby, your pride and joy. Your neighbors drool, and potential suitors swoon. Having that car gives you instant credibility and access to a class of living that would be impossible without it.
But oh boy, is it ever expensive. As many benefits as owning that Ferrari gives you, you know you could trade it in and own a Chrysler 300 outright while paying off other debt. Do you give up ownership of perhaps the greatest car brand in history just to own a more sensible Chrysler?
That’s a question, on a bigger scale, that FIAT and company CEO Sergio Marchionne may have to face.
An article in The Detroit News over the weekend discusses the advice given by investors and financial firms that FIAT complete its purchase of Chrysler. FIAT already owns 58.3 percent of Chrysler, and buying the rest would cost around $2 billion. To come up with the money, all FIAT would have to do is sell all of Ferrari for an estimated $3.9 billion. It would then own the profitable Chrysler outright, have very little debt and be positioned to grow both the FIAT and Chrysler brands across the globe.
But the company’s prized Ferrari would no longer sit in the garage.
This news comes as Marchionne announced a change in strategy to move upmarket. The Detroit News says,
Fiat will concentrate on its premium priced and highly successful 500 small car and its cheaper more utilitarian Panda sister, Alfa Romeos, Jeeps, and upmarket Maseratis, while eliminating slightly bigger but slow selling small sedans like the Fiat Punto and Brava. Details were scarce but Marchionne said he wants to introduce five new Fiats, nine new Alfa Romeos, six Maseratis, and three new Fiat light trucks between 2013 and 2016. There would be a Jeep made in Europe.
More Chrysler vehicles would be built for export.
To pay for this new strategy, and to take full advantage of Chrysler’s profitability, maybe selling Ferrari is the best option. I just don’t know if I could do it.
Should FIAT sell Ferrari to buy the rest of Chrysler?