Fiat Chrysler should change its name, investor says

Should Fiat Chrysler Automobiles be called Jeep/Ram instead?

That's one piece of an investor's multi-part prescription, including spinning off Fiat to focus on North America, to boost the value of the Italian-American automaker.

But Adam Wyden's suggestions don't stop there. Wyden, of New York-based ADW Capital Management, says FCA should merge with Ford or General Motors, reflecting a long-stated pitch for industry consolidation by former FCA CEO Sergio Marchionne, who died this summer.

The suggestions came in a letter this week to the FCA board, which also recommended a spin-off of Alfa Romeo and Maserati and said FCA could expand its investor pool by issuing its financials using U.S. generally accepted accounting principles.

Unlike in years past, though, such suggestions don't reflect a sense that FCA needs to hitch its fortunes to another automaker to survive. Rather, they highlight assumptions about the profit potential of two of FCA's designated global brands — Jeep and Ram — and the company's strong financial performance in recent years.

For the record, FCA CEO Mike Manley tamped down merger talk last month when he said, during a conference call, that the company aims to "deliver our commitments as an independent" once it completes a $7 billion sale of Magneti Marelli in 2019.

In the letter first reported on by Bloomberg, Wyden said FCA is undervalued compared to its Detroit Three rivals. The Bloomberg report noted that "ADW manages $150 million and Fiat is its biggest investment" but that ADW, although a longtime investor, is not "among Fiat’s top 100 shareholders."

"Today, the company is stronger than it has ever been," according to Wyden's letter. "We believe that FCA is the best positioned (automaker) in the world. While the company has had its fair share of challenges to overcome in the past, the story today is entirely different and must be valued accordingly."

The math of a GM/FCA merger would be "jaw dropping," the letter said, noting that Marchionne had once predicted that an automaker merger would lead to more than $5 billion in cost savings every year over four years.

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In a call with the Free Press Thursday, Wyden emphasized the potential benefits of consolidation with Ford or GM.

"Fiat is the best positioned of all three of these guys," Wyden said. "The case for industry consolidation is to improve the economics of the industry."

Marchionne had suggested a potential merger with GM, but was rebuffed.

The ADW letter noted that FCA's European operations should be attractive for an automaker such as PSA Groupe, the parent of Peugeot, which purchased the Opel and Vauxhall brands from GM last year for $2.2 billion. 

Although the Fiat brand holds "sentimental and historical importance" for the company, the letter noted, FCA's European operations are "structurally" lower margin than its operations in North America, which saw pretax profit up 51 percent in the third quarter compared to a year ago.

Given the history of the Fiat brand, it's unclear if the company would ever consider such an idea, but Jon Gabrielsen, a market analyst and auto adviser, offered another reason why dropping Europe might not work for FCA:

“While FCA makes almost all their profits in only (the U.S. and Canada) and break-even or bleed everywhere else, I am left with a sense of: 'And then what?' when contemplating ... them cutting off everything else. Because, I am not convinced that they can remotely cut overhead fixed costs enough to be long-term viable if all they have left is U.S./Canada while no longer having the global scale and market coverage of the most global automakers, Toyota and Hyundai/Kia.”

Contact Eric D. Lawrence: elawrence@freepress.com. Follow him on Twitter: @_ericdlawrence.