Fiat Loss in Europe Widens as Region’s Crisis Zaps Demand

Fiat SpA and Chrysler Group CEO Sergio Marchionne
Sergio Marchionne, chief executive officer of Fiat SpA and Chrysler Group, is counting on Chrysler, which was consolidated into Fiat’s results in June, to propel profit for the group. Photographer: Michele D'Ottavio/Bloomberg

Fiat SpA, the Italian carmaker that controls Chrysler Group LLC, posted a wider first-quarter loss in Europe as the automaker’s sales in the region plunged.

The loss before interest, taxes and one-time items in Europe nearly doubled to 207 million euros ($274 million), the Turin, Italy-based company said in a statement today. The shares fell as much as 5.7 percent.

Without Chrysler, Fiat would have reported a 6 million-euro trading loss in the period as the sovereign debt crisis and a lack of new models at the Italian automaker hit demand. Fiat’s deliveries in the region tumbled 20 percent in the first quarter, outpacing the industrywide 7.3 percent drop.

The loss in Europe “is not good and indicative of just how difficult it is to operate in the euro zone,” said David Arnold, a sales specialist at Credit Suisse Group AG in London.

Fiat fell as much as 23 cents to 3.71 euros and was down 5.1 percent as of 4:58 p.m. in Milan trading. Fiat is the second-worst performer in the 14-member Euro Stoxx autos and parts index after PSA Peugeot Citroen over the past 12 months.

Sergio Marchionne, chief executive officer of both automakers, is counting on Chrysler, which was consolidated into Fiat’s results in June, to propel the group’s profit. First-quarter trading profit more than tripled to 866 million euros from 251 million euros a year earlier on demand for Chrysler 200 and 300 sedans in the U.S. Revenue more than doubled to 20.2 billion euros.

Volkswagen Profit

Fiat owns 58.5 percent of Chrysler, and Marchionne, 59, plans to merge the two manufacturers to boost sales to more than 100 billion euros by 2014 to challenge Volkswagen AG.

The German automaker today reported a 10 percent gain in first-quarter operating profit to 3.21 billion euros, beating analysts’ estimates. Sales rose 26 percent to 47.3 billion euros, boosted by demand for the Audi A6 and A8 luxury sedans.

Volkswagen’s performance contrasts with other European competitors. Peugeot, the region’s second-biggest carmarker, yesterday said sales fell 7.3 percent to 14.3 billion euros in the first quarter. France’s Renault SA reported a 9 percent decline in revenue to 9.54 billion euros in the quarter.

Fiat, which shut down a factory in Sicily at the end of last year, froze new investment in Europe and postponed the introduction of new models because the company doesn’t anticipate a demand recovery until at least next year.

Painful Restructuring

Marchionne, 59, sees a ’painful’ restructuring needed for European carmakers, including plant closures and job cuts, to reduce an estimate 20 percent excess of capacity in the region, he said last month.

First-quarter profit in Latin America dropped to 235 million euros from 306 million euros “driven by price pressure from imports by other carmakers,” The Italian company. Fiat’s luxury brands, Ferrari and Maserati SpA, posted a 15 percent increase in trading profit to 71 million euros.

Net debt rose 300 million euros to 5.8 billion euros in the first three months of the year, surpassing the 5.4 billion-euro estimate by seven analysts surveyed by Bloomberg.

Fiat today confirmed its 2012 targets, “despite the lack of visibility regarding any bottoming out of the European market,” including as much as 4.5 billion euros in trading profit for the year.


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