MILAN -- Low global car inventories and cost cuts should boost Stellantis's profit margins this year, though a shortage of semiconductors and investments in electric vehicles could weigh on results, the newly-formed automaker said.
The forecast came as Stellantis, created by the merger of Fiat Chrysler Automobiles and PSA Group, reported better-than-expected results for 2020.
"Stellantis gets off to a flying start and is fully focused on achieving the full promised synergies [from the merger]," CEO Carlos Tavares said in a statement on Wednesday, announcing last year's results for FCA and PSA.
Combined adjusted earnings before interest and tax (EBIT) amounted to 7.1 billion euros ($8.6 billion) last year. At the end of 2020, combined liquidity stood at 57.4 billion euros and free cash flow at 3.3 billion euros.
A Milan-based trader said the earnings and cash flow were both "well above" expectations.
Stellantis said 2021 results should be helped by three new high-margin Jeep vehicles in North America and a strong pricing environment there. The U.S. market has driven profits for years at FCA and starts off as the strongest part of the new combined group.
The group's guidance assumes no more significant lockdowns caused by the global COVID-19 pandemic, which shuttered auto plants around the world last spring.
Stellantis should also get a lift as its starts to implement a plan aimed at delivering over 5 billion euros a year in savings, without closing any plants. Tavares has also pledged not to cut jobs.
But a pandemic-related global shortage of semiconductors, used for everything from maximizing engine fuel economy to driver-assistance features, could hurt business.
Auto industry executives have said the shortage should ease by the second half of 2021.
Stellantis said its "electrification offensive" could also weigh on results this year. Automakers are racing to develop electric vehicles to meet tighter CO2 emissions targets in Europe and this week Volvo joined a growing number of carmakers aiming for a fully-electric line-up by 2030.
Stellantis plans to have fully-electric or hybrid versions of all of its vehicles available in Europe by 2025, broadly in line with plans at top rivals such as Volkswagen and Renault-Nissan, although Stellantis has further to go to meet that goal.
The carmaker is targeting an adjusted operating profit margin of 5.5 percent to 7.5 percent this year, assuming no further significant COVID-19 related lockdowns. That compares with a 5.3 percent aggregated margin last year: 4.3 percent at FCA and 7.1 percent at PSA excluding a controlling stake in parts maker Faurecia, which is set to be spun-off from Stellantis shortly.
Tavares achieved an improvement in margins at PSA by cutting costs, simplifying its vehicle line-up and delivering synergies on its purchase of Opel/Vauxhall, a model investors hope he can replicate at Stellantis.
Stellantis proposed to distribute a 1 billion euro dividend to its shareholders.
It is planning a capital markets day for late 2021 or early 2022.
Stellantis was formed in January. It has 14 brands, including Fiat, Peugeot, Opel, Jeep, Ram and Maserati.