FCA shares go down on investor concern image

While newly merged Fiat Chrysler Automobiles has a rather grandiose five-year business plan, its investors are not so confident, sending the company’s shares down steeply yesterday.

The share fall comes amid concern from analysts, who are wondering on how CEO Sergio Marchionne and his team of executives would execute the very ambitious plan and especially from where the necessary funds will come.

With investors hot on Tuesday’s strategy presentation in Detroit, yesterday shares fell more than 9% – trading was briefly suspended – and then continued their decrease to almost 12% down – priced at 7.48 euros.

“These targets were almost unnecessarily bullish, leaving multiple execution challenges – even if they won’t be tested for several years,” said Citi analyst Philip Watkins.

“The first quarter was a timely reminder of the risks associated with Fiat’s plan,” said Rabih Freiha of Exane BNP Paribas.

“Fiat’s massive plan, and the necessary capital expenditure and R&D, simply do not look affordable or prudent,” added Max Warburton of Bernstein Research. “Fiat would do everyone a favor, including its employees, management and shareholders, by raising capital.”

Marchionne, now 61 years old, has vowed to remain with the company at least through the plan’s 2018 target, adding that although the first quarter results were disappointing, the new plan’s strategy will soon bear fruit. He did express concern though – as all analysts did – on the debt burn, which is expected to amount to 11 billion euros this year.

Via Reuters