Fiat says profit to fall as Jeep shortage adds to Europe woes
GENEVA (Bloomberg) -- Fiat said first-quarter earnings will fall as U.S. delivery snags at Chrysler Group's Jeep brand compound the effects of Europe's sales slump.
Fiat is sticking to its full-year forecast for growth in trading profit, or earnings before interest, taxes and one-time gains or costs, as it expects to make up for the decline in the first three months, Sergio Marchionne, CEO of both manufacturers, told reporters Tuesday in Geneva.
"This won't be a great quarter, but the important thing is that we're confirming our 2013 targets," Marchionne said after the annual shareholders meeting of product-inspection provider SGS SA, of which he's chairman. At the same time, "there's no certainty when Europe's sales crisis will end."
Marchionne is counting on Chrysler to sustain earnings as he works to end losses at Fiat's mass-market brands in Europe that widened to more than 700 million euros ($912 million) last year.
Fiat, which would have posted a 1.04 billion-euro loss in 2012 without Chrysler, plans to boost trading profit to as much as 4.5 billion euros in 2013 from 3.81 billion euros last year.
Fiat, General Motors, Ford Motor Co. and PSA Peugeot Citroen are among manufacturers planning a combined 30,000 job cuts in Europe in response to the shrinking car market.
The four automakers led a 10 percent decline in European auto sales in February, according to industry figures released today.
Marchionne's turnaround plan in Europe, where the automotive market is set to shrink for a sixth consecutive year, calls for 16 upscale cars, including an Alfa Romeo SUV, a small SUV from Chrysler's Jeep unit and six models at the luxury Maserati division.
The new vehicles will help fill capacity at Fiat's under-used assembly lines in Italy.
U.S. sales at the Jeep brand have slumped in part because of the discontinuation of Liberty SUV output in August 2012.
Jeep has a "volume gap in the U.S., despite demand rising there," as factory retooling for new models for the brand reduce production, Marchionne said.
The Italian carmaker won't alter financial forecasts for 2013 amid the sales crisis in Europe, Marchionne said earlier this month at the Geneva auto show.
The CEO, who grew up in Canada, has estimated that car-industry losses in Europe totaled $7 billion in 2012.
Talks with banks are under way as Fiat prepares to buy the 41.4 percent stake in Chrysler that it doesn't already own from the UAW's health-care fund.
The company has started the valuation process for the holding, Marchionne said March 5.
A U.S. court may rule in June or July on the amount Fiat must pay the UAW fund, known as a voluntary employees beneficiary association, which has been allowed to submit more filings, Marchionne said Tuesday.
That's later than his estimate in December that a decision would come in the first quarter.
Chances are about even between Fiat buying out the VEBA and the fund holding an initial public offering of its stake in Chrysler, and talks with banks on the possible share sale are in preliminary stages, the CEO reiterated.
The Italian company won't decide before mid-2012 on whether to make an offer for the VEBA's stake or letting it proceed with the IPO, he said.
Fiat may pay about 2.23 billion euros to buy the remaining stake, according to an estimate from Goldman Sachs Group Inc., which sees a deal possible within 12 months.
Following a merger of Fiat and Chrysler, the manufacturer should consider "the possible benefits" of a U.S. stock listing, Marchionne said.
Marchionne, 60, was CEO of Geneva-based SGS, the world's largest product-inspection company, from January 2002 until he took the Fiat position in mid-2004.
Exor, the Agnelli holding which controls Fiat, is SGS's biggest shareholder, according to data compiled by Bloomberg. Fiat Chairman John Elkann is also an SGS board member.Contact Automotive News