FCAU Stock: This Could Be Huge for Fiat Chrysler Automobiles NV

FCAU StockThe “Chrysler Pacifica” made its debut at the North American International Auto Show (NAIAS 2016) Detroit Auto Show (DAS). This is Fiat Chrysler Automobiles NV’s (NYSE:FCAU) first venture into the hybrid sector of the auto market (FCA already sells an all-electric version of the “Fiat 500” in select U.S. markets), which should be welcomed by the market. Indeed, FCAU stock is trading up, having picked up steam at the opening of the NAIAS 2016.

The Pacifica, which borrows its name from an early 2000s Chrysler model, is an all-new replacement for the “Voyager” and “Town & Country” models. It is nothing short of an all-new conception of the minivan, a type of car that Chrysler invented in the early 80s. It has eight seats, is rated at 80 miles per gallon, and has sliding doors and batteries that can be fully recharged in two hours, which can support all-electric propulsion for about 30 miles.

The Chrysler Pacifica was born on a brand new platform. It is the successor to the Voyager, which has eight seats. FCA boss Sergio Marchionne said that the company would start to offer electric and hybrid vehicles about two years ago, in order to meet increasingly stringent emission regulations. The decision to introduce the technology in a minivan is no accident; it is a choice dictated by the markets and FCAU stock should see a favorable response.

Chrysler Updates the Minivan

The minivan genre has seduced many American consumers, but it needed a refresher in order to attract younger buyers. Minivans accounted for three percent of the U.S. market in 2015. The minivan has become a signature vehicle, which generated an entirely new segment capable of generating sales of more than a million vehicles a year from 1993 to 2005 in the U.S.

Crossovers and SUV’s started to eat up some of that market share in 2005 and minivan sales reached 452,000 through November of 2015, down nine percent from a year ago. (Source: “2017 Chrysler minivan coming; Dodge not leaving yet,” Detroit Free Press, December 5, 2015.)

The new Pacifica should win back some of the customers who might have considered an SUV or crossover. The Pacifica can certainly add to Chrysler’s bottom line and boost FCAU stock.

Fiat Chrysler has developed the Pacifica with more streamlined forms, choosing to forego the Town & Country name, which would have perpetuated the image of the more traditional or humdrum minivan and the “soccer mom” stereotype. The Pacifica wants to be cooler than that, retaining traditional minivan buyers while opening sales to a new generation of family drivers.

The Pacifica uses an entirely new platform. The gasoline-only version will be marketed in the U.S. in the spring of 2016, followed in the second half of 2016 by the plugin hybrid model. It is not yet known whether the model will arrive in Europe; it could under the Lancia brand. Nevertheless, the hybrid plugin technology will soon creep into other FCA Group brands. At next March’s Geneva Motor Show, Fiat Chrysler could surprise everyone by presenting the “Maserati Levante,” an SUV that might well be offered with a hybrid plugin option.

The Pacifica is very important to Fiat and FCAU stock because of the debut of the company’s plugin hybrid technology, developed by the company’s U.S. research center in Auburn Hills, Michigan. It is the first of a new generation of cars that will adopt this more sustainable solution.

“This minivan,” said Bob Lee, vice president of the department of engines and electric propulsion at Fiat Chrysler, “is designed for mixed use, for vacation and work of a large family.” (Source: “2017 Chrysler Pacifica Hybrid: The 80-MPGe minivan [w/video],” Autoblog, January 10, 2016.)

At the press conference on the opening day of the DAS, ahead of the publication of the annual results of the automotive group scheduled for later this month, Fiat Chrysler said it expects revenue for 2015 of more than 110 billion euros, adjusted operating income equal to or greater than $4.5 billion, an adjusted net profit of about $1.2 billion, and net industrial debt between $6.6 billion and $7.1 billion.

Results from 2015 were well beyond expectations. During a press conference, Marchionne noted Fiat Chrysler is at the top end of its guidance thanks to Jeep’s remarkable performance. As Marchionne stated, “this company is the only one who can earn as a mass producer in all four regions where it produces. It is obvious that we have to say, thank goodness there’s America and the American market, where we have grown continuously every month for more than five years.” (Source: “Fca, per Marchionne risultati 2015 oltre le aspettative,” Milano Finanza, January 11, 2016.)

FCAU Stock Still Seeking Partners for Growth

As for the rumored merger with General Motors (GM), Marchionne said that market conditions warrant further consolidation in the auto industry. “At the moment nothing is absolutely clear,” he states, amid rumors of a possible collaboration agreement with Google and its driverless car technology. (Source: “Marchionne Embarks on Final Mission Impossible at Fiat Chrysler,” Bloomberg, January 11, 2016.)

As for Volkswagen AG (ADR) (OTC:VLKAY), the company may consider a sale of some of its assets. While which, if any, assets will be sold is tough to call, Fiat will likely be a frontrunner to bid on Volkswagen’s assets should GM continue to play hard-to-get. News that California has rejected a VW plan to compensate for the “Dieselgate” scandal, meanwhile, has increased the likelihood of the VW Group launching a sell-off. (Source: “California regulators reject Volkswagen recall plan,” Fox13, January 12, 2016.)

Fiat will focus on advancing its $50.0-billion investment and restructuring plan, with targets to increase annual deliveries by about 2.4 million vehicles—which, by admission of Marchionne himself, are rather ambitious, given that markets like China, Brazil, and Russia are not as strong as they had been. (Source: “Marchionne Embarks on Final Mission Impossible at Fiat Chrysler,” Bloomberg, January 11, 2016.)

However, Marchionne is accustomed to defying naysayers. Analysts challenged Marchionne’s first plans to revamp Chrysler and to float Ferrari (NYSE:RACE), generating $10.0 billion. “And yet here we are,” said Marchionne, after more than doubling the value of Fiat Chrysler. (Source: “Marchionne takes on final Fiat mission,” Taipei Times, January 12, 2016.)

Marchionne may well have another rabbit to pull from his hat. He is said to have been in talks with Google and Apple, both of which need manufacturing partners for their self-driving vehicles.

“I expect a final coup by Marchionne,” said Giuseppe Berta, a professor at Bocconi University in Italy and the former head of Fiat’s archives. “If there are no chances with GM, then a deal in California is the only alternative for Sergio to avoid mediocrity for Fiat Chrysler.” (Source: “Marchionne Embarks on Final Mission Impossible at Fiat Chrysler,” Bloomberg, January 11, 2016.)

Either way, Marchionne still appears to have something to prove to FCAU stock bears and the company’s new hybrid technology may be just the beginning. Holders of Fiat Chrysler stock could benefit.

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