Fiat Chrysler Automobiles NV (NYSE:FCAU) plans to spin off its components business, Magneti Marelli, to focus on its core portfolio and strengthen its capital position.
The company said the separation is expected to be completed by early 2019 after which shares will be distributed to Fiat shareholders. Shares of Magneti Marelli will be listed on the Milan Stock Exchange.
Spin-off part of 5-year business plan
Chief executive Sergio Marchionne said in a statement on Thursday that the move would allow the carmaker to focus on its core business.
"The separation will deliver value to FCA shareholders, while providing the operational flexibility necessary for Magneti Marelli’s strategic growth in the coming years,” Marchionne said.
The spin-off is part of the company’s five-year business plan to be announced in June before Marchionne steps down early next year.
The plan is subject to regulatory approvals and final approval by Fiat's board of directors.
The news comes as the auto industry comes under pressure to respond to the shift away from diesel and petrol vehicles towards electric and hybrid.