Fiat SpA (F), the majority owner of Chrysler Group LLC, tumbled as much as 5 percent after analysts downgraded the stock on concerns over the automaker’s plan to invest in building more upscale models in Italy.
The shares dropped as much as 20 cents to 3.73 euros, the worst performer in the Bloomberg Europe 500 Autos Index and Milan benchmark FTSE MIB Index, and were down 4.4 percent as of 11:36 a.m. in Milan trading.
Fiat Chief Executive Officer Sergio Marchionne presented a plan yesterday to turn around the European operations, which are posting wider losses and led the Turin, Italy-based company to cut its 2014 profit goal by 31 percent to 5.2 billion euros ($6.7 billion). The CEO intends to introduce 19 new models through 2016 that will be produced in Italy, including a small Jeep SUV, 9 Alfa Romeos and 6 Maseratis.
“No magic touch in new industrial plan,” Kristina Church, an analyst at Barclays Plc in London, said in a note to investors. “Competitors have tried on numerous occasions but failed to push upscale.”
At least four analysts cut their recommendation on Fiat after yesterday’s plan was announced, and at least four others reduced their target price on the stock.
Other European automakers also are struggling as industrywide sales head for their biggest annual decline in 19 years. Marchionne said yesterday that he needs to turn around Fiat before a full merger with Chrysler, which he said he’s still targeting to complete in 2015.
“Our primary objective right now is fixing the European environment and getting that up and running so we can restore the full Fiat level of profitability that it needs to achieve,” Marchionne, who heads both companies, said on Chrysler’s quarterly earnings conference call.
Of the 19 new vehicles, 15 will be made for both export outside the region and sale in Europe, according to an investor presentation. Fiat plans to invest as much as 18 billion euros in the next two years to develop new models from a previous target of investing about 12.4 billion euros, according to the presentation.
“For a man famed for ‘optionality,’ Mr. Marchionne is running out of options,” Max Warburton, an analyst with Bernstein Research, said in a note to investors.