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European banks downgrade Fiat, share prices tumble

Posted Nov 23rd 2012 9:00AM


Shares of Chrysler parent company Fiat SpA fell by 5.9 percent on Tuesday. Two European banks downgraded the company's stock, with UBS AG dropping the company's stock from a "buy" rating to "neutral." Likewise, Deutsche Bank cut the company's shares from "hold" to "sell" amid concerns that the company will need a new cash infusion to fund CEO Sergio Marchionne's plans for the automaker. Marchionne has made it clear he plans to purchase the remainder of Chrysler, which will require Fiat to raise somewhere between 1.6 billion and 2.9 billion euros (CAD$2.5 billion and 3.7 billion). That's due in part to the fact that the company may have to start paying fair-market value for Chrysler stock as the company's initial public offer grows near.

Bloomberg reports Marchionne is keen to increase the Fiat stake in Chrysler in order to access the profitable North American manufacturer's cash flow. Fiat could then use those funds to jump start its ailing European operations, though Marchionne has been quoted as saying Fiat doesn't need Chrysler's cash to bring its EU business in line. Last quarter, Fiat reported 20 billion euros of available liquidity, down from 22.7 billion euros (CAD$25.7 billion and 29.2 billion) at the end of June.

News Source: Bloomberg, The Detroit News

Image Credit: John Thys / AFP/Getty

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I agree .. leave Chrysler alone for now. Every division should stand on its own. Even putting this idea out is bad as it does not allow Fiat to "restructure" in its own market. Maybe the Italian gov't should get more active. It is to save jobs there. Gov't has infinite resources -- and Italy can step up -- just like Canada and the USA did for Chrysler.

November 24 2012 at 1:43 PM Report abuse rate up rate down Reply

Tapping Chrysler's cash..wasn't this act done a little over a decade ago, with a different cast ?

November 24 2012 at 12:37 PM Report abuse rate up rate down Reply

That Sergio Marchionne is one sharp guy. I would love the opportunity to work with him for a while.

November 24 2012 at 12:24 AM Report abuse +1 rate up rate down Reply