Fiat Chrysler Raises Outlook as Q2 Profits Jump 25 Percent

Fiat Chrysler Automobiles world headquarters in Auburn Hills, Mich. (AP Photo/Carlos Osorio, File)
Fiat Chrysler Automobiles world headquarters in Auburn Hills, Mich. (AP Photo/Carlos Osorio, File)

Fiat Chrysler Automobiles on Wednesday raised its earnings forecasts after reporting a 25 percent increase in second-quarter profits as SUV and truck sales offset the impact of slumping demand for passenger cars in North America.

The world’s seventh-largest carmaker, FCA said that net profit was 321 million euros ($352 million), compared with 257 million euros a year earlier. Last year’s second-quarter profits were restated to reflect the spin-off of Ferrari.

The carmaker said it was raising its revenue forecast to above 112 billion euros from 110 billion euros, while increasing its earnings before taxes and interest forecast to “above 5.5 billion euros” from “above 5 billion euros” previously.

CEO Sergio Marchionne indicated that those figures were conservative, saying “there is a big plus sign” on them.

North American sales volumes were lower than last year due to fewer sales of compact and mid-size sedans, but improved truck and SUV sales helped boost revenues by 2 percent to nearly 17 billion euros. Volumes overall slipped 2 percent to 666,000 units.

Fiat Chrysler’s North America bottom line also was hit by 414 million euros in charges related to the Takata airbag inflator recall.

North America is the carmaker’s main earnings driver and Marchionne said he expected to fully transition the United States manufacturing footprint out of passenger cars and toward higher-earning trucks and Jeeps by early next year.

That would happen “by probably the end of Q1 of 2017,” he said, adding that he anticipated downtime in some plants during the transition. He said that transition should help improve North American margins toward double-digits.

European sales volumes were up 13 percent as the European market continued its recovery, helped by the Fiat 500 and Tipo families of passenger cars. Shipments of cars and light commercial vehicles were up 14 percent to 367,000.

Maserati shipments were down 17 percent to 6,912 vehicles, cutting brand earnings by 16 percent. Marchionne said the volume reduction was due to overstuffed delivery channels, and that the Levante would help reinvigorate the portfolio.

Marchionne played down the impact of Britain’s vote to leave the European Union on the company’s business both in the United Kingdom, where it sells about 100,000 vehicles a year, and in Europe more generally.

“I don’t think that ‘Brexit,’ as painful as it has been from a political standpoint, is going to have a very negative implication on volumes or on our profitability in Europe going forward,” Marchionne said.

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