LONDON (S&P Global Ratings) July 23, 2018--S&P Global Ratings said today that its ratings and outlook on Fiat Chrysler Automobiles N.V. (FCA; BB+/Positive/B) remain unchanged following the replacement of Mr. Sergio Marchionne by Mr. Michael Manley as CEO at the automotive manufacturer. The succession was originally set to occur in 2019 but was unexpectedly moved up due to complications with Mr. Marchionne's health. FCA had unveiled its industrial plan during its Capital Market Day on June 1, 2018, when Mr. Manley also presented the group's plans for Jeep and Ram, the brands poised to be the group's main growth drivers over the next five years. As such, we do not assume Mr. Manley will lead any deviation from the announced strategy. In our base case for FCA, we already take into consideration the plan's underlying guidelines. Our current base case for FCA includes stable volumes, due to slightly lower volumes in the U.S. offset by growth in other regions. We also factor in continued EBITDA margin progression, thanks to a favorable product mix in NAFTA and EMEA, sizable capital expenditures of up to €45 billion until 2022, a dividend payout of approximately 20% per year commencing in 2019, no material acquisition, and no fines from the civil lawsuit filed by the U.S. Department of Justice (linked to diesel engine emissions). Furthermore we assume the spin-off of components business Magneti Marelli, officially announced earlier this month, will be leverage neutral. We therefore expect FCA will report S&P Global Ratings-adjusted funds from operations to debt of more than 100%, adjusted debt to EBITDA below 1x, and positive free operating cash flow to debt of about 40%. The positive outlook on FCA reflects the possibility of an upgrade if the group continues to show improvements in profitability and cash flow generation, despite weaker market conditions in the U.S., while maintaining solid leverage metrics and not attracting fines of more than €2 billion from the U.S. Department of Justice.
This report does not constitute a rating action.
| Primary Credit Analyst: | Alex P Herbert, London (44) 20-7176-3616; alex.herbert@spglobal.com |
| Secondary Contact: | Vittoria Ferraris, Milan (39) 02-72111-207; vittoria.ferraris@spglobal.com |
| Additional Contact: | Industrial Ratings Europe; Corporate_Admin_London@spglobal.com |
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