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Mike Manley

FIAT Chrysler Automobiles (FCA) has sold its global parts business to US private equity company KKR for $A10 billion. It is the first major deal by new CEO Mike Manley since he took over FCA after the sudden death of Sergio Marchionne.

The sale was made to KKR’s Japanese parts and accessory business, Calsonic Kansei, that has 58 manufacturing plants around the world.

FCA’s parts business, Magneti Marelli, employs 43,000 people and operates in 21 countries. The new business will rank seventh in the world for parts manufacture and supply.

For FCA, the deal will give it funds for further development of future models and fast-track its move into autonomous vehicles, said Mr Manley in a statement.

For FCA customers, it will secure parts supply under a long-term contract with the new Calsonic Kansei business and has the potential to reduce parts prices because of scale efficiencies.

KKR bought Calsonic Kansei from Nissan and other shareholders in 2016. Nissan at that stage had a 41.7 per cent stake in the business. Since it sold the share, Nissan still remains the biggest Japanese purchaser of Calsonic Kansei’s parts.

FCA will not have any shares in the new parts business. Analysts in the US said that KKR paid about 17 times the estimated 2019 earnings of Magneti Marelli, which is more than twice that of similar parts companies Valeo and Continental.

FCA now may consider selling its other two components businesses, Teksid and Comau. Teksid has been part of Fiat since 1917 and operates a casting plant making engine blocks, transmission housings and similar products for FCA, GM, Ford and Cummins.

Comau supplies industrial automation products and services, including the manufacture of robots and laser cutting machines.

In January this year, FCA reported net profit of $A5.7 billion for 2017, up 93 per cent on the previous year, on sales of 4.74 million vehicles.

Revenue in 2017 was $A180 billion, the same as the 2016 year. For 2018, FCA is estimating revenues of $A203 billion.

By Neil Dowling

Manheim
MotorOne