By Eric Sylvers
MILAN-- Fiat Chrysler Automobiles NV, the smallest of Detroit's
Big Three, on Wednesday indicated it is ahead of its rivals in at
least one area: returning to black ink in Europe.
Stronger sales of small trucks and vans and the Fiat 500 and
Jeep pushed Fiat Chrysler to a small operating profit on the
Continent in the last three months of 2014 after 30 quarters of
losses. Fiat Chrysler Sergio Marchionne said he expects the company
to post a full-year operating profit in Europe, the Middle East and
Africa while General Motors Co. and Ford Motor Co. have said they
would lose money again this year in the region.
Europe in 2014 posted its first year of growth in new-car sales
after six years of decline, though production remains well below
the levels before the financial crisis. Some car makers, including
Fiat Chrysler, Ford and Volkswagen AG, have begun to boost
production in Europe after years of reducing output. Fiat Chrysler
earlier this month said it is hiring 1,000 workers at a factory in
southern Italy that makes a small Fiat and Jeep SUV. Cheap
financing, dealership discounts, a nascent European economic
recovery and government subsidies in some countries have helped
fuel a rise in sales in the region.
"Strangely enough, for a guy who has been as negative on EMEA as
I have been now for the last four or five years, I'm actually
turning positive, " Mr. Marchionne told analysts on a conference
call. "I think there is upside from where we are. Just bear with
us, I think 2015 will be all right."
Fiat Chrysler forecast a 12% increase in global sales for this
year to EUR108 billion ($122.5 billion) and a jump of as much as
41% in operating profit, indicating the company is on track with
its EUR48 billion five-year plan presented last May, which at the
time drew criticism for being overly optimistic and unrealistic.
Global vehicle shipments are seen increasing to between 4.8 million
and 5 million from 4.6 million in 2014.
Following a transformational 2014, which kicked off with Fiat
buying the 41% of Chrysler it didn't already own, Mr. Marchionne
must now show investors he can deliver on his plan. Other steps
taken last year by Mr. Marchionne include a reorganization that
created the Dutch-incorporated and London-based Fiat Chrysler, the
new company's debut on the New York Stock Exchange, and the raising
of $4 billion in fresh capital through the sale of shares and a
convertible bond.
The results and forecasts Wednesday failed to excite investors,
as shares dropped before regaining some ground to close down 0.2%
at EUR11.56 in Milan trading. The stock surged 61% last year and
has added another 20% so far in 2015.
"With operations continuing to fall in-line with/behind
expectations and cash generation still seemingly several years out
and by no means guaranteed, we continue to question why investors
should pay more for FCA than for other names in the sector," George
Galliers, of equities researcher Evercore ISI, wrote in a note.
To meet his targets this year, Mr. Marchionne will have to
reverse a skid in results in North America, which accounts for more
than half of revenue and profit, while building on the nascent
European turnaround. He will also have to reignite slowing growth
in Latin America, something Mr. Marchionne says will begin when a
new Brazilian plant comes online by the end of the year.
With the EUR32 million in operating profit in Europe in the
fourth quarter, Fiat Chrysler turned a profit in all four of the
macro-regions for which it breaks out results.
"For those of you that have been in this business long enough to
remember our travels from 2007 until today, and the level of
skepticism that was associated with our strategic redirection of
our assets and the redeployment of our manufacturing activities in
a particular direction, this is the first indication, the first
tangible proof of the fact, that this thing can be turned," Mr.
Marchionne said.
In the fourth quarter, net profit plunged 68% to EUR420 million
as a tax gain from 2013 wasn't repeated. Operating profit rose 14%
while revenue climbed 13% to EUR27.08 billion. Fiat Chrysler said
it wouldn't pay a dividend on 2014 profit to preserve funds for the
five-year plan. Net industrial debt at the end of last year was
EUR7.7 billion.
Fiat Chrysler has yet to get a strong tailwind from the
strengthening dollar though that is expected to change as
production increases in Italy, Chief Financial Officer Richard
Palmer said on the conference call.
Though the financial results of FCA US, the former Chrysler
Group LLC, are included in Fiat Chrysler's numbers reported on
Wednesday, the Auburn Hills-based corporate unit will report its
results separately on Feb. 3.
Write to Eric Sylvers at eric.sylvers@wsj.com
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