Mike Manley took over as CEO of Fiat Chrysler Automobiles from Sergio Marchionne on July 21. Marchionne, the architect of the Fiat-Chrysler merger, passed away unexpectedly four days later. That same emotional day, Manley had to present FCA’s disappointing second-quarter financial results. He also had to lower the guidance on operating profits for 2018 and net cash at year-end.
In the second quarter, earnings before interest and taxes fell 20 percent short of analysts’ consensus expectations because of operational issues: higher-than-expected launch costs for the new Ram 1500 pickup, lower China deliveries because of higher tariffs and a 150 million euro decline in Maserati’s operating profit.
Manley and Chief Financial Officer Richard Palmer cut the EBIT forecast to 7.5 billion to 8 billion euros from 8.7 billion euros and also reduced the expected net cash at year-end from 4 billion euros to 3 billion euros.
Earnings revisions by a new CEO are nothing new. After taking the Ford CEO role from Alan Mulally on July 1, 2014, Mark Fields took just three months to revise downward Ford’s profit estimates for the year. In the case of FCA, the disappointing quarterly numbers took the market by surprise, pushing shares down 15 percent on the day.