The Chrysler Price: Crunching Sales Numbers Before an IPOby
The spreadsheet jockeys at JPMorgan Chase are crunching reams of data in preparation to sell Chrysler shares to investors. The automaker’s two main shareholders, Fiat and the United Automobile Workers union, have been doing the same for months. As Fiat looks to bolster its 58.5 percent Chrysler holding and the union angles to get the highest price for its 41.5 percent stake, every measure of value is in the mix: multiple of sales, price to earnings, discounted cash flow, etc. In the financial fix-it shop, these are the socket wrenches and screwdrivers.
But what about the metal metric? How many vehicles has Chrysler been selling? We crunched two years of global sales for Chrysler and its biggest American rivals, Ford Motor and General Motors, to get a sense of where value and sales volume intersect with auto investors today. The numbers, though far from settling the question of per-share value for Chrysler, seem to buttress the union’s push for a higher price:
• Worldwide, GM sold 15.3 million vehicles from September 2011 to August 2013. At its current market value of $52.2 billion, that translates to about $3,419 per vehicle sold.
• Ford has much more horsepower on Wall Street. It sold 8.5 million cars and trucks in the same period yet is trading at a value of $68.3 billion—or $8,079 for every vehicle sold.
• Chrysler, meanwhile, sold 3.4 million cars and trucks in the past two years. At GM’s per-vehicle metric, that adds up to a market value of $11.6 billion; at Ford’s data point, Chrysler would be worth $27.4 billion.
Fiat’s bids for the union’s shares, reported to be as low as $5 billion, fall way short of these rough estimates.
Of course, there are a lot of other factors that need to be baked into a more complete appraisal. For one, Ford’s top seller has been its F-Series pickups, which carry relatively burly profit margins. Ford also makes a tidy return from financing vehicles. And Chrysler certainly has some dents on its balance sheet, most notably almost $14 billion in debt and an almost $9 billion shortfall in its pension funding.
The car business, at the end of the day, is pretty binary: A company is either moving metal or it’s not. And the union—the men and women staffing the assembly lines each day—may be paying much more attention to volume gains than the people hammering together spreadsheets on Wall Street and in Fiat’s Italian headquarters.