Oct. 27 (Bloomberg) -- Fiat SpA said third-quarter profit more than tripled on higher demand for Chrysler vehicles in the U.S. and Canada.
Earnings before interest, taxes and one-time items, which Fiat calls trading profit, rose to 851 million euros ($1.21 billion) from 256 million euros a year earlier, the Turin, Italy-based carmaker said in a statement today. Profit beat the 696 million-euro average estimate of eight analysts. It’s the first full quarter of Fiat results including Chrysler figures.
Sergio Marchionne, chief executive officer of both automakers, is counting on earnings from the Brazilian unit and Chrysler as Fiat struggles to end losses and boost sales in Europe. Fiat’s European market share through September shrank to 7.2 percent from 8.1 percent a year earlier as deliveries fell 12 percent, according to the European Automobile Manufacturers’ Association.
“Chrysler’s performance for the remainder of this year and in 2012 will be important for the stock,” Max Warburton, a London-based Sanford C. Bernstein analyst with a “market perform” rating on Fiat, said in a note to clients before the results. “The U.S market may be the best place to be in 2012.”
Revenue more than doubled to 17.6 billion euros. Fiat raised its full-year earnings target, saying trading profit exceed 2.1 billion euros. The carmaker reiterated a forecast for sales of more than 58 billion euros for 2011.
European automakers have been reporting mixed third-quarter results. Rival Volkswagen AG, Europe’s largest carmaker, said today operating profit surged 46 percent to 2.89 billion euros on demand for Audi and VW brand sport-utility vehicles in China and the U.S. PSA Peugeot Citroen, Europe’s second-largest carmaker, yesterday cut its 2011 auto profit target and said it may eliminate as many as 3,500 jobs as pricing pressure rises.
Fiat was downgraded one level by Fitch Ratings last week on concern that a combination with Chrysler will increase financial risk for the Italian carmaker. Fiat was lowered to BB, two steps below investment grade, from BB+, Fitch said. The rating company has a negative outlook on the manufacturer.
Moody’s Investors Service and Standard & Poor’s lowered their ratings on Fiat earlier this year, citing concerns that the integration with Chrysler will leave Fiat responsible for the American carmaker’s debt.
Marchionne, while reaffirming plans to merge Fiat and Chrysler, said Oct. 19 the combination is not a “priority” and there’s no timetable set to complete the process.
Fiat is not in talks with the United Auto Workers union’s retiree health-care trust, a voluntary employee beneficiary association, to buy their 41.5 stake in Chrysler, he said. Fiat expects to get to 58.5 percent by the end of the year after meeting performance targets set during the Chrysler bailout.
Chrysler’s U.S. hourly workers ratified on Oct. 26 a new four-year contract, completing the United Auto Workers’ negotiations with U.S. automakers. Auburn Hills, Michigan-based Chrysler agreed to add 2,100 jobs and invest $4.5 billion, according to the union’s contract summary released Oct. 12.
--Editors: Chad Thomas, Dan Liefgreen
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