Increased revenues and virtually all profits are coming from Chrysler Group.
Strong sales from the North American Free Trade Zone resulted in a Fiat-Chrysler Group profit of €866 million ($1.14 billion) in Q1. The NAFTA region of the Group is comprised largely of Chrysler operations, and the sales and profits from traditional Chrysler brands, including the Jeep Grand Cherokee, Dodge Ram, and Chrysler and Dodge minivans, propped up a bad quarter that excluding Chrysler showed break-even results for Fiat, a decrease of €251 million in profits during Q1 2011.
The weak consolidated Fiat-Chrysler Group return of 4.2% on sales of more than €20 billion stood in stark contrast to Chrysler Group’s return of 7% on €872 million in revenues during the quarter reported earlier in the day. Simply put, courtesy of U.S. and Canadian taxpayers, a reorganized Chrysler, now 58.5% owned by Fiat, is providing the profits for the newly created Fiat-Chrysler Group.
North America accounted for 77% of the profit.
Europe in general (-7% in sales) and Italy in particular (-21%, and predicted to have the lowest sales this year since 1968) are damaging returns at Fiat, areas where Chrysler has little exposure since its total international sales were a mere 49,000 in Q1.
“It is clear from this performance recorded in Q1, the market conditions are in a state of flux,” said Sergio Marchionne, CEO of Fiat-Chrysler Group, about the Eurozone crisis. “It’s not just a volume issue, there are pricing actions that are not the most rational I’ve ever seen,” Marchionne said on a call for analysts and reporters.
The EU is now most assuredly headed for its fifth straight year of auto sales declines, as unemployment reaches depression levels in France, Spain, Greece and Italy. Ongoing austerity programs, the result of considerations for special financial interests in the European Union well outside automaker interests continue to make things worse.
Even though Marchionne as head of the European Auto Manufacturers Association has been loudly calling for a regional solution to the ongoing collapse of southern European markets, German election year politics preclude an overall EU stimulus policy.
Nevertheless, Fiat Chrysler Group financial results remain on track to produce in 2012:
- Revenues at €20.2bn
- Trading profit of €866mn
- EBIT of €895mn
- Net profit €379mn
- Net industrial debt at €5.8bn
- Available liquidity strong, increasing to €21.4bn (including €3bn in undrawn committed credit lines)
Earlier in the day on the Chrysler earnings call, Marchionne said that Chrysler has no intention to purchase health care trust or the so-called VEBA equity, whereby the UAW and CAW own the balance of Chrysler Group. Now speaking as the head of the Fiat-Chrysler group, he said that Fiat needs to look at it closely and there is a better than 50% chance it could happen.
