By Agnieszka Flak
MILAN (Reuters) - Milan-listed shares in Fiat Chrysler (NYSE:FCAU) Automobiles (FCA) (MI:FCHA) fell to a 10-week low on Thursday, a day after its chief executive called for large-scale industry consolidation.
Sergio Marchionne on Wednesday renewed his plea for shrinking the number of players in the global auto sector to sustain the heavy capital investments needed to meet demands for cleaner, safer vehicles.
Sources told Reuters earlier this month that Marchionne was hoping for a deal to plug FCA's weaknesses but that he may struggle to find a partner.
At the start of Wednesday's presentation, which followed FCA's release of weaker-than-expected first-quarter results, Marchionne said the aim of the discussion was not to put the company up for sale, but analysts were not convinced.
"Marchionne is a shrewd operator and rightly investors have been asking what was the purpose of yesterday's presentation," said Arndt Ellinghorst, an analyst at Evercore ISI. "The answer is very simple; he is looking to force a marriage for FCA."
The stock closed sharply lower for the second straight session on Thursday, falling 5.7 percent to 13.35 euros. The losses over the last two sessions wiped 1.9 billion euros ($2.1 billion) off FCA's market capitalization.
Traders said Marchionne's comments put some of FCA's own difficulties in the spotlight, notably its debt pile, among the industry's biggest, weak margins in its profit engine North America and a flagging Latin American business.
The difficulties are likely to become even more apparent as the North American car market peaks.
"The company holds together operationally due to an intense management focus and disciplined financial control. But it hardly looks in good shape to withstand a downturn," said Max Warburton, an analyst with Bernstein.
Marchionne said the option of consolidation was not "a matter of life or death for FCA", which some industry analysts found reassuring, but also took as meaning the process could take longer than expected.
Analysts said Marchionne's best bet would be a marriage with one of its Detroit peers to fix its margin problem in a region that in contributed 75 percent of its first quarter operating profit, but doubted there were willing partners.
"This is not to say that some partners couldn't be strongly encouraged to at least sit down at the table," Adam Jonas, an analyst with Morgan Stanley (NYSE:MS) said. "Ford and GM (along with FCA) would stand to gain immensely from further potential platform consolidation and the elimination of duplicative/excess nameplates and product lines."
Only hours after Marchionne's pitch, Ford CEO Mark Fields told CNBC on Thursday the No. 2 U.S. automaker was not looking at consolidation and was focusing on its own business, echoing comments made by Mary Barra, CEO at larger rival General Motors (N:GM), earlier this month.