Fiat Chrysler Looks To Pass Ford in Profit -- WSJ

01/26/18 02:47 AM EST
By Chester Dawson 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (January 26, 2018).

DETROIT -- Fiat Chrysler Automobiles NV said Thursday it nearly doubled its earnings in the latest quarter, moving the auto maker closer to its ambitious growth targets and surpassing the profitability at rival Ford Motor Co.

The strong results are a sign of the company's revival after emerging from bankruptcy almost a decade ago and the merger with Fiat under the Italian auto maker's chief executive, Sergio Marchionne.

Mr. Marchionne, who plans to step down early next year, said he expects Fiat Chrysler will meet its profit and debt targets for 2018 and continue to perform well under his yet-to-be-named successor.

"FCA is positioned to be a top performer," he said on a conference call with financial analysts, adding that the company will lay out new goals for the next four years on June 1.

Fiat Chrysler's fourth-quarter net profit rose 97% from a year earlier to EUR804 million ($997 million), even as revenue fell 3% to EUR28.9 billion. The company said its adjusted operating profit, which excludes one-time items, rose 22% to EUR1.89 billion, driven by sales of Jeep SUVs and Ram pickup trucks. The improvement was in line with a FactSet consensus of analyst forecasts.

That helped boost Fiat Chrysler's group profit margin to 6.4%, above Ford Motor's 5% global margin last year. General Motors Co., which has yet to report its full-year results, sported a 9% profit margin through three quarters.

Mr. Marchionne needled Ford on the call with analysts, saying Fiat Chrysler is poised to beat its crosstown rival's earnings this year.

"There's a very strong likelihood we will outperform Ford in terms of operating earnings in 2018," he said.

On Wednesday, Ford posted a 19% decline in fourth-quarter operating income to $1.7 billion.

Fiat Chrysler's share price has surged in recent months, and is up 37% so far this year while Ford's has dropped nearly 7%. Shares of Fiat Chrysler rose 0.8% to $24.33 on Thursday.

Ford, with sales of 6.6 million vehicles globally last year and a stock market value of $47.9 billion, is still bigger than Fiat Chrysler, which shipped 4.7 million vehicles last year and has a market capitalization of $46.9 billion.

Fiat Chrysler's revenue in North America, the auto maker's largest market, fell 5% in the fourth quarter to EUR16.8 billion, but its adjusted operating profit margin in the region rose to 8.0%, up from 7.1% a year earlier thanks to demand for lucrative Jeeps and Ram trucks.

Fiat Chrysler's market share in the U.S. shrank to 10.8%, from 11.7% a year before and 13.3% in the same quarter of 2016. That reflects a move to reduce lower-profit-margin fleet sales and to abandon some segments such as entry-level sedans.

The company's market share in China, the world's largest auto market, was just 0.8%, nearly unchanged from 0.9% in 2014.

The Italian-American auto maker's goals for 2018 are revenue of EUR136 billion, adjusted net profit of between EUR4.7 billion and EUR5.5 billion, and net industrial cash of at least EUR4 billion. The company first set 2018 targets four years ago, then raised them in 2016. On Thursday, the company forecast full-year net revenue of EUR125 billion, adjusted net profit of EUR5.0 billion and net industrial cash of EUR4.0 billion.

Fiat Chrysler is in the midst of rapidly expanding production capacity for larger SUVs and pickup trucks, even as it has canceled production of smaller vehicles such as the Dodge Dart, Chrysler 200 and Jeep Patriot. It is counting on continued strong demand in the U.S. as it rolls out several new models, including the latest iterations of its Jeep Wrangler and Cherokee, as well as a restyled Ram 1500.

Richard Palmer, the company's chief financial officer, told analysts that increasing light-truck output is critical for meeting its full-year financial goals. "Key to our ability to reach these targets is the execution of production ramp-ups in the first half of the year," he said.

Write to Chester Dawson at chester.dawson@wsj.com

 

(END) Dow Jones Newswires

January 26, 2018 02:47 ET (07:47 GMT)

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