Marchionne Keeps Fiat Chrysler Rolling With SUV-Heavy PlansBy and
Earnings bolstered by European demand, Maserati models
North America profit rose even as vehicle deliveries declined
Fiat Chrysler Automobiles NV posted fatter profit margins in Europe and North American auto markets, boosting confidence in the carmaker’s plan to bolster its finances by better meeting global appetite for sport utility vehicles.
After Chief Executive Officer Sergio Marchionne had warned the first three months would be Fiat Chrysler’s weakest quarter this year, demand for SUVs including the Alfa Romeo Stelvio helped boost margins in Europe to 3.2 percent, from 1.9 percent a year earlier. Despite idling two U.S. assembly plants and retooling them to make SUVs and pickups instead of sedans, returns also ticked up in North America.
The results were reassuring for investors in what was “potentially a troublesome quarter,” according to George Galliers, an analyst with Evercore ISI. The results show Fiat Chrysler is able to improve earnings in North America, “even on lower volumes and in a more competitive end market.”
Marchionne, 64, is putting a years-long search for a merger on the back burner and remaking Fiat Chrysler’s lineup with the goal of eliminating debt before he retires in 2019. After General Motors Co. rebuffed his approach for a combination in 2015, the CEO has focused on making the automaker a more attractive partner down the road. He told investors in mid-April that the automaker needs to avoid “unrealistic dreams” of combining with another company soon.
Sticking to Targets
Fiat Chrysler reiterated its full-year targets, rebutting skepticism that still surrounds 2018 profit and balance sheet goals. The company’s U.S. shares climbed as much as 9.6 percent, the biggest intraday jump since the week Donald Trump was elected U.S. president. The stock has gained 26 percent this year.
Adjusted first-quarter earnings before interest and taxes jumped to 1.54 billion euros ($1.67 billion) from 1.38 billion euros a year earlier, the Italian-American company said Wednesday in a statement. That beat the 1.44 billion-euro average of five analyst estimates compiled by Bloomberg. The targets confirmed for 2017 include at least 7 billion euros in adjusted Ebit.
Earnings were also fueled by surging profits at the upscale Maserati brand. Bolstered by its own SUV -- the new Levante -- Maserati’s earnings jumped to 107 million euros from 16 million euros a year earlier. Alfa Romeo may also start generating a profit by the fourth quarter, Marchionne said on a conference call.
Profit for Fiat Chrysler’s once-struggling European operations almost doubled to 178 million euros as new Alfa Romeo models and the budget Fiat Tipo grabbed market share.
In North America, earnings increased 1.1 percent to 1.24 billion euros, even as shipments dropped 6 percent amid the phase out of the Dodge Dart compact and Chrysler 200 sedan and the ramp-up of the new Jeep Compass SUV.
A seasonal increase in net industrial debt was limited to 500 million euros, versus 1.5 billion euros a year earlier, Fiat Chrysler said. The company is sticking to plans for net industrial debt to total less than 2.5 billion euros at the end of the year, compared with 5.11 billion euros as of March 31.
“We continue to believe FCA represents one of the most attractive equity stories in our space,” Galliers, the Evercore analyst who rates the stock the equivalent of a buy, wrote in a note to clients.