FCA Q2 operating profit rises 15% on N.A., Maserati gains

Fiat Chrysler Automobiles’ second-quarter operating profit increased 15 percent to $2.19 billion (1.87 billion euros), despite roughly flat shipments and revenue.
The automaker was able to do so with higher profit margins in its North American operations and Maserati, along with better performances in international markets. North American margins rose half a percentage point to 8.4 percent.
The world’s seventh-largest automaker reported
FCA said shipments for the quarter fell 1 percent to 1.23 million vehicles, mostly due to a 14 percent decline in North America. Shipments in Latin America, Europe and Asia were higher.
Maserati had an impressive quarter, quadrupling earnings before interest and taxes to $178 million (152 million euros), as shipments nearly doubled to 13,200 from April to June — led by the Levante SUV. Maserati’s profit margin reached 14.2 percent in the quarter, up from 6.2 percent a year ago.
In midday trading, FCA shares fell 1.3 percent to $11.75 per share.
North America
The company’s North American operations slightly declined across the board outside of its profit margins, as FCA reduced fleet shipments and retooled several plants to concentrate on production of crossovers, SUVs and pickups.
Shipments for the region declined 14 percent in the second quarter to 576,000 units. FCA CFO Richard Palmer said the company reduced second-quarter fleet shipments in North America by 20,000 units and that fleet represented 21 percent of the region’s sales in the period, down from 24 percent in the second quarter of 2016.
The company reported a 4 percent decline in adjusted operating profit of $1.58 billion (1.35 billion euros) on a 10 percent decline in revenue to $18.72 billion (16.01 billion euros).
Net industrial debt during the quarter fell 18 percent to $4.91 billion (4.2 billion euros).
The group confirmed its full-year guidance of net industrial debt less than $2.92 billion (2.5 billion euros); adjusted net income of more than $3.51 billion (3 billion euros); and net revenues of between $134.5 billion and $140.4 billion (115-120 billion euros).
CEO Sergio Marchionne put his search for a merger on the back burner to work on eliminating Fiat Chrysler’s debt before he retires in 2019. Ever since General Motors rebuffed his approach for a combination in 2015, Marchionne has focused on debt reduction to make the carmaker a more attractive partner down the road. He told investors in mid-April that the company needs to avoid “unrealistic dreams” of a merger soon.
Marchionne on Thursday again confirmed he will step down from leading the automaker after completing its five-year plan in 2018.
He said his successor will come from a “suitable stable” of people within the company, taking the reins in early 2019.
“I’m not worried about succession,” he told analysts and media during a conference call Thursday.
Marchionne said he will have “zero” to do with the automaker’s plans once he steps down.
FCA on Thursday announced it will outline its newest five-year plan, covering 2018 to 2022, early next year. Marchionne cited the timing of the plan coming before his successor takes control to underscore why he believes there will be a smooth transition to the next CEO.
Marchionne raised the possibility of spinoffs of non-core businesses within the new plan. He said that FCA needed to be “purified” by “what can be considered non-OEM activities.”
The components division of FCA includes Magneti Marelli, which has been rumored to be on sale for years, the Comau’s robot business and Teksid castings. The division posted revenue of $3 billion (2.65 billion euros) in the second quarter of 2017, up 9 percent from the same period of 2016. The unit’s adjusted earnings were up 17 percent to $152 million (130 million euros).
Wrangler, Ram 1500
Marchionne confirmed two of the company’s crucial product launches remain on track to be unveiled and begin production in the next six months.
He said the redesigned Jeep Wrangler, code-named JL, will debut in the U.S. in November, followed by the next-generation Ram 1500 — code-named DT — bowing at the 2018 Detroit auto show in January.
Start of production for both, as Automotive News has reported, are expected to occur the same month of their debuts. To keep supplies of both vehicles available, FCA will continue producing the current generation Ram 1500 and Wrangler into 2018.
Detroit Three
FCA’s profits continue to trail its crosstown rivals, despite varying one-time charges and other actions.
General Motors on Tuesday reported net income dropped 42 percent to $1.66 billion, primarily as a result of the pending sale and restructuring of its European operations.
Ford Motor Co. reported second-quarter net income of $2.04 billion, up 3.7 percent from the same period a year ago because of a favorable tax rate.
Fuente: Automotive News