Betting on Fiat's future

Posted by: Gail Edmondson on May 22, 2006

The jury is still out on Fiat’s turnaround after its close brush with financial meltdown in 2003. But the evidence is growing daily that the Italian automaker is back on track. Today Fiat Group chief executive Sergio Marchionne snapped up 20,000 shares at 9.38 euros (that’s $11.92/share at today’s exchange rate), betting Fiat can now motor into the 21st century with a healthy balance sheet. That follows a similar vote of confidence by Fiat Chairman Luca di Montezemolo, who snapped up 88,000 shares for 11.27 euros/share ($14.32 a share) on May 3.
Check out the timing: Fiat’s stock plunged to 5.34 euros a share in April 2005, convincing General Motors to bail out of its alliance and pay $2 billion in February 2005 to escape a put option signed in 2000. GM’s decision now seems a costly miscalculation. Fiat’s stock has since come roaring back — it’s up 75% year-on-year and 28% since Jan. 1.
And the good news just keeps coming. Marchionne recently upped his operating profit forecast for Fiat Auto in 2006 to $234 million — a sharp reversal after five years of steady losses. Morgan Stanley analyst Adam Jones sees an even rosier operating profit of $367 million. The engine for growth is Fiat’s new Punto. In the first four months of 2006 the Punto helped power a 16.5% increase in Fiat’s European sales, while the overall market declined by 0.2%, helping Fiat claw back lost market share. With top managers voting with their wallets, the Fiat story is now looking all the more like an Italian miracle in the making.

Reader Comments

Chris

May 23, 2006 10:44 AM

I hope Fiat makes a recovery. Having driven the Stilo and the new Grand Punto I can personally say they are very nice cars. Fiats biggest problem from a customers stand point is quality. They have to get their quality control standards improved. The Japanese companies have this down to an art. Fiat must improve.

Sarah McBride

May 23, 2006 10:40 PM

Fiat should make a splash with its comeback - and take it from there.

Post a comment

 

About

Want the straight scoop on the auto industry? Our man in Detroit David Welch, brings keen observations and provocative perspective on the auto business.

BW Mall - Sponsored Links

Buy a link now!