Fiat Declines as S&P Probably to Downgrade on Weak Demand: Milan Mover
Fiat SpA CEO Sergio Marchionne
Daniel Acker/Bloomberg
Sergio Marchionne, chief executive officer of both automakers, is counting on Chrysler to propel growth at Fiat, whose volume brands lost about 500 million euros in Europe last year as the region’s debt crisis causes consumers to hold back on purchases.
Sergio Marchionne, chief executive officer of both automakers, is counting on Chrysler to propel growth at Fiat, whose volume brands lost about 500 million euros in Europe last year as the region’s debt crisis causes consumers to hold back on purchases. Photographer: Daniel Acker/Bloomberg
Fiat SpA fell in Milan after Standard & Poor’s put the Italian carmaker that controls Chrysler Group LLC on review for a credit-rating downgrade, citing weakening demand in Europe and increased competition in Brazil.
Fiat lost as much as 4 percent to 4.48 euros, giving the company a market value of 5.7 billion euros ($7.4 billion), and was down 2 percent to 4.56 euros at 1:09 p.m.
“Weakening demand in Europe’s oversupplied mass vehicle market, particularly Italy’s,” probably will pressure Fiat’s earnings and cash flow, Robert E. Richards, credit analyst for S&P in Frankfurt, said in a statement today.
Richards said S&P probably will lower Fiat’s rating by one level to BB- within the next 90 days. Fiat was downgraded one level by Fitch Ratings in October to BB. S&P and Moody’s Investors Service already lowered their ratings on the company earlier last year. All of Fiat’s ratings are below investment grade.
Fiat said last week that earnings before interest, taxes and one-time items, which it calls trading profit, will increase this year to 3.8 billion euros to 4.5 billion euros from 2.39 billion euros in 2011.
Sergio Marchionne, chief executive officer of both automakers, is counting on Chrysler to propel growth at Fiat, whose volume brands lost about 500 million euros in Europe last year as the region’s debt crisis caused consumers to hold back on purchases.
Mass Market
Fiat led a decline in auto sales in Europe last year with a 12 percent slump to 947,786 vehicles, according to the European Automobile Manufacturers’ Association in Brussels. Deliveries in Italy fell 16 percent in January.
“We’ve got the mass car market in Europe, which is economically unproductive and which, just in raw, pure economic analysis, does not deserve capital allocation of any kind,” Marchionne told analysts last week on a conference call.
Marchionne last week sold 600,000 Fiat shares for 2.79 million euros. The stock was part of the 4 million shares awarded to the CEO in 2009. The CEO sold the holding “in order to pay part of the tax liabilities” stemming from awarding the shares. The executive, who also sold 600,000 Fiat Industrial SpA shares last week, plans to sell additional Fiat and Fiat Industrial stock “in the coming days,” Fiat said in a statement Feb. 3.
Marchionne’s selling may affect the share performance of Fiat and Fiat Industrial, Martino De Ambroggi, an analyst at Equita SIM SpA in Milan, wrote in a note today.
Fiat Industrial, the truck and tractor unit spun off from carmaker Fiat SpA (F) last year, fell as much as 4.2 percent to 7.65 euros in Milan today.
To contact the reporters on this story: Tommaso Ebhardt in Milan at tebhardt@bloomberg.net;
To contact the editors responsible for this story: Chad Thomas at cthomas16@bloomberg.net
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