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Fiat First-Quarter Profit Falls on Chrysler Earnings Decline (2)

April 29, 2013

Fiat First-Quarter Profit Falls on Chrysler Earnings Decline

The folding sunroof on a Fiat SpA 500 cabrio automobile is seen on display at the 83rd Geneva International Motor Show in Geneva, Switzerland. Photographer: Chris Ratcliffe/Bloomberg

Fiat SpA (F), the Italian automaker that controls Chrysler Group LLC, said first-quarter profit fell 23 percent on costs for new Jeep model rollouts.

Trading profit, or earnings before interest, taxes and one- time items, declined to 618 million euros ($809 million) from 806 million euros a year earlier, the Turin, Italy-based company said today. That missed the 691 million-euro average of six analyst estimates compiled by Bloomberg.

First-quarter profit at the U.S. automaker fell 27 percent to 593 million euros ahead of the introduction of new Jeep Compass and Cherokee sport-utility vehicles. Sergio Marchionne, chief executive officer for both automakers, said today he’s leaning toward a primary listing in New York once the Italian carmaker buys the 41.5 percent Chrysler stake it doesn’t own.

“It’s the most efficient capital market I can get my hands on,” Marchionne said on Chrysler’s earnings call when asked about the likelihood of a main listing in New York and a secondary listing in Milan after the combination.

Fiat stuck to a target to increase full-year profit to between 4 billion euros and 4.5 billion euros from 3.81 billion euros in 2012, even after the European auto market plunged 9.7 percent in the first quarter. The automaker expects deliveries in the region to decline 3 percent to 5 percent in 2013.

Shares Drop

“Guidance is overly optimistic given the weaker-than- expected start to the year in terms of trading profit -- particularly in the case of Chrysler,” David Arnold, an autos specialist with Credit Suisse in London, said today in a note to clients.

The shares declined 6 cents, or 1.2 percent, to 4.64 euros as of the close of trading in Milan. The stock has gained 22 percent this year, valuing the carmaker at 5.8 billion euros.

The first-quarter loss in Europe narrowed 24 percent to 157 million euros as the Italian company reduced sales and administrative costs. A 43 percent profit gain to 80 million euros at super-car brand Ferrari also boosted earnings.

Marchionne plans to combine Fiat and Chrysler to forge an automotive group to challenge General Motors Co. (GM:US) and Volkswagen AG (VOW) by purchasing the Chrysler stake owned by the United Auto Workers’ retiree health-care fund, or VEBA.

The two sides are in court disputing the price for a portion of the shares Fiat is seeking to buy by exercising options it has. The Italian carmaker may end up paying more than its currently offering, the Delaware judge overseeing the case suggested last week.

Financing Talks

Financing talks with banks on Chrysler are under way and Fiat may get additional loans to buy the holding, people familiar said last week. The Italian carmaker is approaching banks to refinance a 1.95 billion-euro credit line before the deal, people familiar said last month.

Italy’s biggest manufacturer may pay as much as $3.5 billion for the rest of Chrysler, UBS estimates. The carmakers are likely to be a single company by June of next year, when Marchionne will complete his 10th year as head of the Italian group, the CEO said earlier this month.

Fiat isn’t alone in grappling with a declining European market. Volkswagen, the region’s largest carmaker, last week reported a 26 percent drop in first-quarter operating profit. Daimler AG (DAI) said weaker results at Mercedes-Benz caused earnings before interest and taxes to tumble 56 percent. The declines show that the effects of Europe’s sovereign-debt crisis have spread beyond countries pushing through austerity measures.

Europe Woes

Ford Motor Co. (F:US)’s first-quarter pretax loss in the region more than tripled to 462 million euros as the U.S. automaker moves to eliminate 6,200 jobs and close three production sites. Ford’s cuts are part of industrywide plans to shut five plants.

PSA Peugeot Citroen (UG)’s revenue in the period fell 6.5 percent to 13 billion euros. The company is eliminating 11,200 jobs in France and closing a factory near Paris, where workers have staged strikes over the restructuring plans.

Instead of shutting additional factories in Italy, after closing one in Sicily at the end of 2011, Marchionne plans to fill underutilized plants with more upscale models, such as the Maserati Quattroporte sedan and the Alfa 4C sportscar.

Marchionne’s turnaround plan for Fiat in Europe calls for 16 upscale cars, including an Alfa Romeo sport-utility vehicle, a small SUV from Chrysler’s Jeep brand and six models at the luxury Maserati division.

To contact the reporters on this story: Tommaso Ebhardt in Milan at tebhardt@bloomberg.net; Mark Clothier in Southfield, Michigan at mclothier@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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Companies Mentioned

  • GM
    (General Motors Co)
    • $34.8 USD
    • 0.12
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  • F
    (Ford Motor Co)
    • $17.41 USD
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    • -0.06%
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