Fiat Chrysler spins off sports car maker Ferrari to boost value

Fiat Chrysler Automobiles plans to spin off sports car maker Ferrari into a separate company, a way to unlock value in the luxury brand and distinguish it from its mass-market parent.

The company said Wednesday that spinning off Ferrari was part of a plan to raise capital to support the new merged carmakers' expansion plans. Fiat Chrysler's five-year plan calls for increasing net income by five times by 2018.

Fiat Chrysler CEO Sergio Marchionne said in a statement that it was "proper that we pursue separate paths for FCA and Ferrari" following the completion of the merger of Chrysler and Fiat with a listing on the New York Stock Exchange earlier this month.

The news comes a month after General Motors made a similar move to distinguish its luxury Cadillac brand, separating Cadillac's business operations from the rest of GM and moving the brand's headquarters from Detroit to New York. “We are very proud of our Detroit roots and heritage, and the majority of the Cadillac workforce will remain in Michigan," newly-appointed Cadillac CEO Johan Nysschen said in a September statement. "But there is no city in the world where the inhabitants are more immersed in a premium lifestyle than in New York. Establishing our new global headquarters in Soho places Cadillac at the epicenter of sophisticated living. It allows our team to share experiences with premium-brand consumers and develop attitudes in common with our audience."

“Cadillac’s mission is to reinstate the brand to a pre-eminent position among global luxury brands, a bold challenge requiring a distinct and focused new organization,” said GM president Dan Ammann. "More than a division or brand, Cadillac is becoming a center of excellence for our company.”

Fiat Chrysler's goals with the Ferrari spinoff are similar. The company will sell 10 percent of Ferrari's shares in a public offering,with the remaining 90 percent distributed to its own shareholders. The board intends to complete the move during 2015, and said shares would be listed in the United States and with a possible double listing in Europe.

A Ferrari spinoff had long been speculated by industry experts as Marchionne seeks to maximize values from the group's various brands. However, Fiat Chrysler's other luxury brands, including Alfa Romeo and Maserati, will remain part of the parent company.

The decision to break off Ferrari comes about two months after an awkward management transition at Ferrari that saw the longtime chairman Luca di Montezemolo resign after a public spat over strategy with Marchionne, who has taken over as chairman of Ferrari.

Marchionne has been vocal in his displeasure over Ferrari's long absence from the Formula One car racing winner's circle, and has pledged to get the team back to the top. The last time it won the driver's championship was in 2007.

Also Wednesday, Fiat Chrysler Automobiles N.V. announced it returned to a profit in the third quarter thanks to a good performance by its luxury brands and gains in North America and Asia.

It reported a net profit of 174 million euros ($221 million) for the three months ending Sept. 30. That compares with a loss of 15 million euros in the same period last year.

Revenues rose 14 percent to 23.5 billion euros. Luxury brand sales increased 35 percent, North America saw a 20 percent gain and Asia was up 30 percent. Latin American revenues dropped 12 percent in a weak market.

Deliveries rose 9.7 percent to 1.1 million vehicles.