Bloomberg News

Fiat Quarterly Profit Beats Estimates as Chrysler Earnings Gain

February 01, 2012

Feb. 1 (Bloomberg) -- Fiat SpA, the Italian carmaker which controls Chrysler Group LLC, reported fourth-quarter profit that beat estimates as earnings at the American carmaker advanced.

Earnings before interest, taxes and one-time items, which Fiat calls trading profit, more than doubled to 765 million euros ($1 billion) from 319 million euros a year earlier, the Turin, Italy-based carmaker said in a statement today. Profit was estimated to reach 759 million euros, according to the average estimate of 16 analysts surveyed by Bloomberg. Revenue also more than doubled to 19.6 billion euros.

Sergio Marchionne, chief executive officer of both automakers, today forecast 2012 profit will increase to 4.5 billion euros from 2.39 billion euros last year on the strength of Chrysler’s earnings, which have been consolidated into Fiat’s results since June. That compares with a 3.24 billion-euro estimate for next year from 15 analysts. Chrysler, which posted its first profit last year since emerging from bankruptcy in 2009, has been offsetting Fiat’s slumping fortunes in Europe, where annual losses are estimated at 800 million euros.

“It has been a long-time between profits in Europe for the majority of Europe’s mass-market carmakers, VW aside,” Michael Tyndall, an analyst at Barclays Capital in London, said in a note to investors Jan. 19. “2012 could be an interesting year if the patience of Europe’s laggards runs out.”

Fiat rose as much as 28 cents, or 6.2 percent, to 4.87 euros and was up 4.3 percent as of 1:25 p.m. in Milan trading. The shares have gained 35 percent in 2012, valuing the carmaker at 6 billion euros.

Chrysler Profit

Chrysler earlier today reported that it earned $734 million in net income last year, excluding costs associated with paying back U.S. and Canadian government loans, beating the forecast that it boosted to $600 million in October. Net income may double to about $1.5 billion in 2012 as sales climb 18 percent to $65 billion, the U.S. company said.

Marchionne, who aims to merge Fiat with Chrysler by 2015 and boost revenue to more than 100 billion euros in 2014, is looking for a third partner in Europe to increase efficiencies and cut development costs in an effort to end the losses.

Fiat, which owns 58.5 percent of Chrysler, is willing to participate in an industry consolidation in Europe to compete with Volkswagen AG, the region’s biggest carmaker, Marchionne said last month. Fiat led a decline in auto sales in Europe last year with a 12 percent slump to 947,786 vehicles, according to the European Automobile Manufacturers’ Association in Brussels.

Rising Debt

Net debt at the end of 2012 was 5.5 billion euros. Fiat expects debt to increase to as much as 6 billion euros in 2012.

“Net debt is a key concern,” Stuart Pearson, a Morgan Stanley analyst in London, said in a note to investors Jan. 24 “The deep value within Fiat-Chrysler has always been in the terminal value of a merged and restructured organization. Unfortunately, 2012 is likely to see a step backwards from this goal if cash concerns slow essential investment.”

To create the necessary car-making efficiencies, automotive groups need to build from 8 million to 10 million vehicles a year, Marchionne, 59, said in January in Detroit. Currently only General Motors Co., Volkswagen and Toyota Motor Corp. are producing at or near that level. Fiat and Chrysler sold about half that figure last year.

Marchionne’s renewed interest in teaming up with another company comes as he considers lowering his 2014 sales target to 5.7 million cars from a previous forecast of 5.9 million. Fiat may globally lose 500,000 vehicle sales annually as a result of the European debt crisis, he said last month. Fiat and Chrysler deliveries will total about 4.9 million autos in 2014, based on the average estimate of 10 analysts surveyed by Bloomberg News.

--With assistance from Francesca Cinelli in Milan and Brian Lysaght in London. Editors: Chad Thomas, Chris Reiter.

To contact the reporters on this story: Tommaso Ebhardt in Milan at tebhardt@bloomberg.net; Craig Trudell in Southfield, Michigan, at ctrudell1@bloomberg.net

To contact the editors responsible for this story: Chad Thomas at cthomas16@bloomberg.net; Jamie Butters at jbutters@bloomberg.net.


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