Fiat and Italian Government Work Together to Boost Exports

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Fiat Industrial SpA and the Italian Government are working together to improve the manufacturers’ efficiency.  Some of the latest news on the company are highlighted below. Overall business is tough for Fiat in Europe but Sales in Latin America are improving. There are also some key questions regarding the truck segment and a recent high profile resignation.

Fiat and Italian Government Work Together to Boost Exports

Worth highlighting


Fiat SpA (BIT:F) (BIT:FP) (BIT:FI) (BIT:FPI) is committed to completing the transformation process that started in 2011 with the spin-off from FIAT, through the merger of Fiat SpA (BIT:F) (BIT:FP) (BIT:FI) (BIT:FPI) and CNH Global NV (NYSE:CNH) into a new Netherlands-based company. The operation will improve the financial flexibility of the group and allow a more consistent comparison with peers . After Q2 results, key items of the full-year guidance remained unchanged, with any fine tuning of targets postponed until Q3 results. The market for trucks (IVECO) remains tough in Europe and somewhat improved in LatAm. Expectations for CNH Global NV (NYSE:CNH) remain positive mainly thanks to improving mix, with industry volumes expected to be flat at best.

Key questions raised

The key focus is on: 1) current trading and outlook in trucks business, where expectations are for a weakening of Germany and France in H2 and a tough H1-13, with pre-buying of Euro5 to provide some support afterwards; 2) impact of the US drought on AG demand. On this issue FI believes that while earnings for farmers are compensated by insurance refunds, the market might be affected in 2013 by a lower propensity to invest; and 3) the recent resignation of Mr Rossotto as Group Treasurer, entirely driven by the personal desire to pursue a different career.

Market impact
The weakness of the IVECO business is well known by the market and the full-year expectations already take this trend into account. The stock could have some upside. The company might enjoy a re-rating driven by the merger with CNH, eliminating a cheaply-priced minority that was disturbing the overall valuation picture of Fiat SpA (BIT:F) (BIT:FP)

Summary
? FI is at the end of the transformation process started with the spinoff from FIAT: CNH and FI to merge by year end
? Further deterioration seen in the truck market in H2-12 in Europe, as France and German markets deteriorate
? No major impact from the drought in US in 2012, possible weak market in 2013.

Disclosure: No position in any securities mentioned

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