Experimental feature

Listen to this article

00:00
00:00
Experimental feature
or

Fiat defied the crisis in its core European market, reporting higher 2011 and fourth-quarter earnings bolstered by profits at its businesses overseas.

The Italian company’s results were lifted by profits at its US Chrysler subsidiary and strong sales in Brazil. Sergio Marchionne, Fiat and Chrysler’s chief executive, described the group as “a new global car company” able to cope with the downturn in its home market.

“Notwithstanding the very difficult trading conditions that we’re all experiencing in Europe, Fiat/ Chrysler is on solid ground and it can face the next phase of developments in Europe with some serenity,” Mr Marchionne said.

Fiat’s full-year net profit, which includes earnings from Chrysler, was €1.65bn ($2.17bn), compared with the €222m net profit it reported in 2010.

Net unusual income related to Fiat’s acquisition of the US carmaker added €1bn to its 2011 net income. Stripped of this, Fiat’s profit was €684m, against €342m in 2010.

The company reported a fourth-quarter net profit of €265m, compared with the €153m it reported the previous year.

Fiat is one of Europe’s carmakers most challenged by the current economic slowdown because of its strong presence in Italy’s declining car market and focus on small cars, a segment where all manufacturers are having to discount in order to compete.

Mr Marchionne acknowledged that Fiat, which also owns the Ferrari, Maserati and Alfa Romeo brands, lost half a billion euros last year on its volume car business in Europe.

However, Chrysler reported net income of $183m for all of 2011 – compared with a net loss of $652m reported in 2010 – and modified operating profit of nearly $2bn.

Mr Marchionne showed investors a league table listing Fiat and Chrysler as number seven on a list of global car producers, after Ford Motor and before PSA Peugeot Citroen.

“It’s fair to say that if Fiat/ Chrysler were a purely European carmaker, we’d face a difficult situation going forward,” Mr Marchionne said. North America accounted for more than half of the two carmakers’ combined 4m unit sales last year.

Fiat took an initial 20 per cent stake in Chrysler and now owns 58.5 per cent of its US subsidiary. A healthcare trust managed on behalf of Chrysler’s unions owns the remaining 41.5 per cent.

Fiat gave broad ranges for its earnings guidance in 2012, which Mr Marchionne said reflected uncertainty around the eurozone recovery. The company forecast net income of €1.2bn to €1.5bn and said that it expected its net debt to rise to €5.5bn-€6bn this year because of higher capital spending.

Analysts took the rising capex as an encouraging sign for Fiat, which has scrimped on new products since the financial crisis and seen its European sales suffer. “The debt is coming up because the business is reinvesting,” said Philippe Houchois, analyst with UBS.

Copyright The Financial Times Limited 2017. All rights reserved.
myFT

Follow the topics mentioned in this article