Marchionne to update Fiat-Chrysler plan due to Europe woes
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COLUMBUS, Ohio -- Sergio Marchionne, who heads Fiat and Chrysler Group, will revise two-year growth plans for both automakers later this month to reflect the slump in European auto sales.
To assume that Fiat's outlook for Europe is going to be confirmed "is nonsense because the market won't be there," Marchionne said. "We will be updating our forecasts for '13 and '14 as a consequence."
Marchionne faces pressure from politicians in Italy, including Prime Minister Mario Monti, after the Turin-based automaker backed off its initiative Fabbrica Italia. Under that plan, Fiat was to spend 20 billion euros ($26 billion) to boost production in Italy in exchange for labor concessions.
European car sales fell 8.5 percent in August for an 11th straight monthly decline and several auto executives said last month that a European rebound was unlikely within two years. That raised questions about Fiat's ability to meet targets laid out in its five-year growth plan that was announced in 2010. Marchionne outlined a separate five-year plan for Chrysler in late 2009.
Marchionne will outline his new 2013-2014 forecast for Fiat-Chrysler on Oct. 30, he told reporters here on Monday. "You will see an update of what we think will happen in 2013 and 2014," he said before delivering a speech on creative advertising at Ohio State University.
Chrysler, which exited government-funded bankruptcy protection in 2009 under the management control of Fiat, has become Fiat's main source of strength as auto demand in Europe contracts. The combined Fiat-Chrysler group now makes more than two-thirds of its profits in the United States.
VEBA stake
Since 2009, Fiat has boosted its stake in Chrysler to 58.5 percent from 20 percent after meeting a series of performance targets set by the U.S. Treasury
Fiat would like to increase its stake in Chrysler by buying shares now owned by the United Auto Workers' retiree health-care fund, known as VEBA (voluntary employees beneficiary association), which owns 41.5 percent of the company.
Fiat is seeking to exercise a call option to boost its Chrysler stake by 3.3 percent but Fiat and the VEBA are now at odds over what those shares are worth. The trust is looking to maximize the value of its Chrysler stake to cover escalating healthcare costs for the U.S. automaker's retirees.
Marchionne said in June that Fiat would pay less than 200 million euros for the added holding that's in dispute in the Delaware Chancery Court. "When we signed the damn thing in 2009, it was clear," he said. "Today, now that things have changed and we're making some money, it's incredible how differences of opinion arise."
Marchionne said Fiat will "show up" to exercise its call option every six months, as allowed by the 2009 bankruptcy documents. He will attempt to buy another small stake in Chrysler from the VEBA in January.
Reuters and Bloomberg contributed to this report
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