GM General Motors Company

By Jeff Bennett 

Fiat Chrysler Automobiles NV narrowed the profit gap with its Detroit rivals in the first quarter, drawing on continued momentum for its Jeep sport-utility vehicles and Ram pickup trucks to more than double operating margins in North America.

The Italian-U. S. auto maker has been increasing U.S. sales for six years, but failed to keep up with Ford Motor Co. and General Motors Co. in the closely watched margin race. It earned EUR1.23 billion ($1.39 billion) in North America in the first quarter, or nearly $2,200 per vehicle sold in the region, compared with EUR601 million a year ago. Revenue rose 6% in the region, pushing its sales nearer to Toyota Motor Corp., the No. 3 new-car seller in the U.S.

Fiat Chrysler posted a 7.2% margin in North America that was behind the 8.7% booked by GM during the same period and topped the 6.7% reported by Ford in the year-ago first quarter. Ford hasn't yet released results for this year's first quarter.

The operating margin performance answers industry observers and rivals who have criticized Chief Executive Sergio Marchionne for valuing market share growth over the bottom line.

During a conference call, executives said the company is off to a good start this year, but didn't provide much insight on whether the strength in North America would last. That uncertainty, along with weakness in Asia Pacific revenues, pushed Fiat Chrysler shares 2% lower to $8.02 in afternoon New York trading on Tuesday trading.

Fiat Chrysler said overall first-quarter net profit rose to EUR478 million. The Italian-American car maker's net profit represented a sizable jump from the EUR27 million generated during the first three months of 2015, but those results excluded Ferrari, which was spun off in January.

On an operating basis, the company earned EUR1.38 billion, compared with EUR700 million for the same period a year earlier. First-quarter revenue rose 3% to EUR26.6 billion compared with the first quarter of 2015. Nearly two-thirds of that revenue came from North American operations and nearly all of the operating profit.

The strength in the U.S. has largely been built on Jeep, an iconic brand that has sold SUVs for 75 years. The division is benefiting from low gasoline prices. Its 5% U.S. market share outperforms other light-truck brands: Land Rover, for instance, has under 1% of the U.S. market, and GM's GMC truck lineup is 3%.

Mr. Marchionne, Fiat's CEO since 2002, started merging the Italian auto maker with Chrysler in 2009 as the Detroit company was in bankruptcy. In recent years, he has been searching unsuccessfully for a merger with a bigger auto maker.

Of chief concern for potential suitors is Fiat Chrysler's debt. Mr. Marchionne aims to cut indebtedness as part of his strategic plan, but it is considered behind GM and Ford in terms of the health of the balance sheet.

The company's net industrial debt minus cash on hand rose 31% to EUR6.59 billion during the first quarter. Mr. Marchionne said working capital expenditure increases, which was partially responsible for the increase, will reverse in the second quarter and net industrial debt would finish below EUR5 billion for the year.

Fiat Chrysler earned EUR96 million in Europe, a market that continues to recover from years of economic malaise. Most global auto makers have struggled to make money in the region amid high production capacity and price wars.

The auto maker posted a modest profit in its Latin American operations despite a continued downturn in key markets, including Brazil's 28% year-over-year volume decline. The EUR11 million profit compared with a EUR65 million loss a year ago.

Asia and Pacific revenues slipped to EUR949 million from EUR1.51 billion as the auto maker shipped about half of as many vehicles at it did the same period a year earlier. Fiat Chrysler made a modest profit of EUR12 million, down from EUR65 million a year ago amid a shift to local production of Jeep SUVs to sidestep hefty import tariffs.

Write to Jeff Bennett at jeff.bennett@wsj.com

(END) Dow Jones Newswires

April 26, 2016 15:27 ET (19:27 GMT)

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