As Fiat Chrysler Automobiles NV chief executive officer Sergio Marchionne starts to look beyond his reign at the automaker, he is betting he can silence naysayers one more time.
The savvy dealmaker has set himself the monumental task of increasing deliveries by almost 50 percent, while at the same time erasing 7 billion euros (US$7.62 billion) in debt and more than tripling net income to about 5 billion euros by 2018. With plans to expand Alfa Romeo into a serious BMW challenger proving tougher than expected and no game-changing deal on the horizon, most analysts are not giving him much of a chance.
“Ambitious is not really an adequate word to describe it; ‘fantasyland’ might be more appropriate,” Sanford C Bernstein Ltd analyst Max Warburton said in a report. “We would dearly love to see Marchionne leave on a high, but right now it’s hard to envisage quite what the glorious exit to this extraordinary career is going to look like.”
After calling off efforts to force General Motors Co into a merger, the 63-year-old chief executive officer has made implementing a 48 billion euro investment and restructuring plan his final job at the company he has been running since 2004. The targets he has laid out — including increasing annual deliveries by about 2.4 million vehicles, more than BMW AG sells in a year — appear out of touch with reality, especially with former growth markets like China, Brazil and Russia struggling.
IHS Automotive forecasts modest growth for Fiat Chrysler, with sales edging up to about 5 million vehicles in 2018. That is a far cry from Marchionne’s target of 7 million. A similar miss is expected on the goal of generating 4.7 billion euros to 5.5 billion euros in profit. Adjusted net income is projected at 3.28 billion euros in 2018, the average estimate of five analysts surveyed by Bloomberg show. They also do not expect the automaker to be debt-free in three years.
The doubts have not swayed Marchionne.
Expectations “have been lower than my targets since I arrived in 2004 as no one believed in my first plan, or in Chrysler’s revamp, or that Ferrari would be worth US$10 billion: And yet here we are,” Marchionne said on Monday last week at an event marking the completion of the spinoff of Ferrari, a move that more than doubled the market value of the combined group and raised about 4 billion euros for Fiat Chrysler.
Marchionne has more than pride at stake. Under an incentive plan approved in 2014, he is entitled to receive 4.32 million Fiat Chrysler shares if the company meets its 2018 net income target.
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