Fiat Chrysler Reports $717 Million Profit for 2014

DETROIT (Detroit Free Press/TNS) -

Fiat Chrysler CEO Sergio Marchionne called 2014 “a momentous year,” as Fiat and Chrysler transformed into a single company, even though its profits fell 67 percent.

“2014 … allowed us to put all of the pieces in place to create FCA, to have what is now the seventh-largest carmaker in the world and to operate as a unified entity in terms of ownership.”

Last year, as Chrysler was fully absorbed by Fiat, the company changed its name and joined the New York Stock Exchange. Since then, the company’s stock has risen 45 percent, after closing Wednesday’s trading session down 29 cents at $12.91.

“Fiat was the best-performing major auto stock in 2014,” Max Warburton, an automotive analyst, said in a research note. “Fiat is run by a genius with a unique focus on shareholder value.”

But from a financial perspective, 2014 was a rough year for the automaker.

Fiat Chrysler said Wednesday it earned a profit of 632 million euros, or $717 million, for 2014, a steep decline from 2013 but still within the range of earnings the company said it would reach for the year.

Much of the decline was caused by higher recall costs, the cost to overhaul some of the automaker’s plants to build new models like the Jeep Renegade and Chrysler 200, and the cost of acquiring Chrysler shares previously held by the UAW Retiree Medical Benefits Trust.

In 2014, FCA’s profit fell 67 percent from the 1.9 billion euros ($2.2 billion) it earned last year as the automaker invested in its expansion plans.

FCA earned 47 cents per share in 2014 compared with 74 cents per share the prior year.

Analysts, on average, had expected the automaker to earn 50 cents per share.

Warburton said the company’s stock is probably overvalued. The company’s profit margin, at 3.4 percent, is lower than profit margins for Ford or General Motors and still carries a heavy debt load.

“Haven’t expectations got far too high for a company that remains so fragile?” Warburton wrote.

In 2014, Fiat Chrysler’s global revenue increased to 96.1 billion euros or $108.9 billion, compared with 86.6 billion euros or $98.3 billion.

In Europe, the company earned a profit for the first time in years. The automaker reported a pretax profit of 32 million euros in Europe, and expects its performance there to improve this year, Marchionne said.

“We have now no regions which are bleeding,” Marchionne said.

This year, the automaker said it expects it will earn a profit of 1 billion to 1.2 billion euros. The automaker expects it will sell between 4.8 million and 5 million new cars and trucks.

Last May, Marchionne unveiled an aggressive five-year plan designed to dramatically increase vehicle sales to 7 million vehicles annually by 2018.

On Oct. 13, the newly renamed Fiat Chrysler Automobiles began trading on the New York Stock Exchange.

Also in October, Marchionne announced plans to sell a 10 percent stake in Ferrari’s shares in a public offering this year. FCA plans to distribute 80 percent of Ferrari’s shares to existing Fiat Chrysler shareholders. The remaining 10 percent of Ferrari is owned by Piero Lardi Ferrari, the second and only living son of founder Enzo Ferrari and vice chairman of Ferrari.

In December, Fiat Chrysler Automobiles completed public offerings of shares and bonds and raised $3.9 billion before expenses to help pay for its five-year strategic plan.

In 2014, Fiat Chrysler sold 4.6 million cars and trucks globally, falling slightly short of Marchionne’s goal of selling 4.7 million for the year.

Marchionne is attempting to rapidly expand the company’s sales by boosting global sales of both Jeep and Alfa Romeo.

Sales of the Jeep brand surpassed 1 million vehicles in 2014 for the first time in Jeep history. Marchionne’s goal is for Jeep sales to top 1.9 million by 2018.

The goal for Alfa Romeo is to more than quadruple worldwide sales from 95,000 in 2013 to more than 400,000 by 2018, with 150,000 coming in the U.S., Canada and Mexico. The Alfa Romeo 4C went on sale late last year in the U.S., marking its return to America after a 19-year absence.

FCA US, the division previously known as Chrysler, employs more than 77,000 employees, 96 percent of whom are based in the U.S. The automaker operates 36 manufacturing plants, including 23 in the U.S., six in Canada and seven in Mexico.

The automaker will report financial results for FCA US separately next Tuesday.