Fiat CEO Sergio Marchionne announced that the Italian company will spin off its farm and construction equipment as well as heavy truck businesses to "give birth" to a global auto company that could feasibly build 6 million cars a year by 2014.
Fiat shares rose 3.5%, to 10.77 euros (U.S. $14.52), on the highly anticipated news, with 11% of capital equal to 121 million euros ($163.18 million) changing hands.
"We believe right now is the time produce the spin off," Marchionne told analysts after presenting Fiat's 5-year business plan. "It's the perfect time to do the spinoff. If we can do it now, we can weather anything."
Marchionne said Fiat didn't do it earlier because it needed the collective strength of all the business to turn the company around financially after he took over in 2004.
"Now, however, that process is complete and there is no longer any reason to keep together sectors that work with such diverse logic. The existing structure no longer serves any useful purpose," Marchionne said.