TURIN, Italy Shareholders at Italy's Fiat SpAFIA.MI approved a split between its autos and industrial businesses on Thursday, a move aimed at transforming the company into a global car player.
Fiat is splitting off its industrial holdings, including the Iveco trucks business and farm gear maker CNH Global NVCNH.N, with the avowed aim of unlocking their value through a separate listing and freeing up growth at the auto group.
Under the demerger, stockholders will get one share in each unit. Fiat is 30.4 percent owned by Exor, the Agnelli family holding.
The move comes as European carmakers are seeing a drop in sales with the end of government scrappage incentives, with Fiat faring among the worst with August sales falling 24.2 percent in Europe.
Chief Executive Sergio Marchionne said after the vote on Thurday he did not expect a turnaround in car demand this year.
"Until the end of 2010, probably the first quarter of 2011, we will not see a revival of natural demand in the system," said Marchionne, the blunt-talking Italian-Canadian manager who has made Fiat a top European turnaround story.
After the demerger, announced by Marchionne in April, the auto and industrial units will each have 2.5 billion euros ($3.3 billion) of net industrial debt.
The break-up, scheduled to be completed by the end of the year, is seen as opening the way to an eventual merger between Fiat and Chrysler, the U.S. automaker in which Fiat has management control. Its 20 percent stake is due to rise to 35 percent once it meets restructuring goals.
Chrysler is a major part of Marchionne's goal of producing 6 million vehicles a year, which he sees as the threshold to global status. He reaffirmed Chrysler could be listed in 2011.
The auto unit, Fiat SpA, which will hold car and parts businesses, including the powertrain segment, is forecast to double revenues to 64 billion euros in 2014.
The industrial unit, which Marchionne wants to see listed on the Milan stock exchange as of Jan. 3, will include industrial and marine businesses along with CNH and Iveco. Revenues are expected to reach 29 billion euros in 2014.
Industrial will have two chief executives running CNH and Iveco and not a single top executive, in part because of securities regulations in the United States, where CNH is listed, Marchionne said.
Fiat's shares were down 2.2 percent at 10.21 euros.
"I am struggling to get excited," said Erick Hauser, a Credit Suisse analyst.
Industrial debt had been 3.7 billion euros at the end of the second quarter "and it's now 5 billion," he said.
Marchionne's comments on car sales meant "that's another six months before we know when it's going to be better," he added.
"And it looks like Fiat Industrial will have two CEOs for now, so if a reason for the spin-off was to have a leaner structure, that is not the case yet."
(Additional reporting by Stefano Rebaudo, writing by Ian Simpson and Silvia Aloisi; Editing by Dan Lalor)
($1 = 0.7641 euro)
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