Fiat Chrysler's Profit Jumps
April 26 2016 - 9:30AM
Dow Jones News
Fiat Chrysler Automobiles NV said its first-quarter net profit
rose to €478 million ($539 million) as North American consumers
snapped up the auto maker's higher-priced sport-utility vehicles
and pickup trucks.
The results suggest Chief Executive Sergio Marchionne's plan to
turn the U.S. market into a big-vehicle profit machine may be
paying off. He has already curtailed some car production in favor
of pushing out more Jeep SUVs.
North America's adjusted operating profit more than doubled to
€1.23 billion ($1.39 billion), compared with €601 million ($678
million) for the same time period a year earlier. The company's
operating margin also grew to 7.2%. Although not equal to General
Motors Co.'s 8.6% for the quarter, the margins are much closer than
they had been after Mr. Marchionne's choice to go all in on trucks
and SUVs. Ford Motor Co. reports its results Thursday and generally
targets North American margins above 9%.
Investors will be looking for signs during Tuesday's conference
call on whether Mr. Marchionne believes these results are
sustainable over a longer period.
For the quarter, the Italian-American car maker's net profit was
a major jump from the €27 million the company generated during the
first three months of 2015. The previous-year results, however,
excluded Ferrari which was spun off in January. On an adjusted
operating basis, the company earned €1.38 billion, compared with
€700 million for the same time period a year earlier. First-quarter
revenue rose 3% to €26.6 billion.
On a regional breakdown, Fiat Chrysler pulled off what few
competitors have been able to do in Latin America: make money. The
company generated €11 million on an adjusted basis, compared with a
loss of €65 million for the same time period a year earlier. Much
of the profit was attributed to cutbacks in marketing costs,
improvements in production and sales of higher-priced vehicles such
as the Jeep Renegade.
The auto maker also earned €96 million in Europe. While an
improvement over the same period a year earlier, Fiat Chrysler has
yet to fully connect with the recovery in that market. In March,
new car sales in the European Union rose 6%, bringing volumes back
to levels seen in 2007.
While SUV sales are increasing in Europe, smaller, low-profit
cars are still dominant in Europe due to higher gas prices and more
narrow city streets. Fiat Chrysler is pushing Jeep hard in Europe,
beginning production of Jeep Renegades in a plant in southern
Italy.
In Asia Pacific, Fiat Chrysler's adjusted operating profit fell
81% to €12 million. The company blamed lower vehicle shipments as
it transitions to local Jeep production.
China is a major piece of Fiat Chrysler's expansion plans, with
Mr. Marchionne targeting a fivefold increase in Jeep sales there to
500,000. The group spent $750 million to open a new factory in
southern China late last year to produce the vehicles locally, thus
avoiding high import tariffs, and exploit the surge in demand for
SUVs there. It is starting pre-sales of a new locally produced Jeep
Renegade at the Beijing car show this week.
Deborah Ball contributed to this article.
Write to Jeff Bennett at jeff.bennett@wsj.com
(END) Dow Jones Newswires
April 26, 2016 09:15 ET (13:15 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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