Fiat Chrysler Automobiles (NYSE:FCAU) said that it has agreed to sell its Magneti Marelli subsidiary ("Marelli") to a Japanese auto-parts supplier owned by KKR & Co. (NYSE:KKR). 

It's the first major deal for FCA CEO Mike Manley, who took the top job in July following the death of his mentor, longtime CEO Sergio Marchionne. But it's not a new idea: FCA has been trying to part ways with Marelli, an auto supplier that focuses on electrical and high-tech electronic components, for at least the past two years. 

Here's what we know about the deal, what we don't yet know, and what it could mean for FCA's balance sheet.

Mike Manley presented the all-new 2019 Ram 1500 pickup at the North American International Auto Show in January 2018.

FCA's new CEO, Mike Manley, just made his first deal. Will it lead to a dividend for FCA shareholders? Image source: Fiat Chrysler Automobiles.

What we know about the deal

Here's what we know about the deal, from FCA's statement and news reports:

  • Japanese auto supplier Calsonic Kansei Corporation, which is owned by private-equity firm KKR, will acquire 100% of Marelli. 
  • The combined company will be called Magneti Marelli CK Holdings. It will be based in Japan, and led by Beda Bolzenius, currently Calsonic's CEO. The combined company will be one of the world's top 10 auto-parts suppliers, with revenue of more than $17 billion and about 65,000 employees worldwide.
  • Marelli will continue to supply components to FCA under a multiyear agreement, and will continue to have a significant presence in Italy. 
  • The transaction is expected to close in the first half of 2019.

What we don't yet know about the deal

There's one big question that hasn't yet been answered: How much cash is changing hands here? 

FCA and KKR released a joint statement that said the deal "represents a transaction value of 6.2 billion euros" (about $7.1 billion). That's significantly higher than the valuation put on Marelli by most analysts, which raises some questions about the structure of the deal. 

One likely clue: Reuters, citing a source close to the negotiations, reported that the 6.2-billion-euro valuation excludes Marelli's debt. FCA has been working for years to reduce its debt load; it's possible (even likely) that Calsonic/KKR agreed to take on some of FCA's debt as part of the deal. 

What it might mean for FCA's balance sheet

As of June 30, FCA had 16.36 billion euros in debt attributable to its automotive business, versus about 16.82 billion euros in cash. With auto sales slowing in key markets around the world, Manley would surely like to lower that debt further, boost FCA's cash hoard -- or better yet, both. 

Most major automakers have hefty cash hoards, intended to keep their future-product programs on track through a recession. Automakers have high fixed costs; historically, they have seen profits shrink (or swing to losses) when sales decline during a recession. 

I suspect that Manley would sleep more soundly if FCA were able to boost its cash hoard above 20 billion euros before the next economic downturn. It's possible that this deal will do that. 

Could this deal lead to a dividend? 

It's also possible that this deal will give Manley the room to do something that Marchionne wanted to do for years: begin paying a dividend to FCA shareholders. During FCA's first-quarter earnings call, the last before his death, Marchionne hinted that it might be possible for FCA to begin paying a dividend in 2019. 

At the time, FCA had begun preparations to spin off Marelli to shareholders. It's not yet clear whether the terms of this deal will give FCA what it needs to begin paying a dividend, but it's a tantalizing possibility. 

I expect we'll learn much more about the implications of this deal when FCA reports its third-quarter earnings on Tuesday, Oct. 30. 

John Rosevear has no position in any of the stocks mentioned. The Motley Fool recommends KKR. The Motley Fool has a disclosure policy.