Fiat Chrysler Automobiles NV shares rallied as investors shrugged off lower-than-expected first-quarter profit and focused on chief executive Mike Manley’s confirmation of the carmaker’s 2019 earnings targets.
The Italian-American company said adjusted earnings before interest and taxes fell 29 per cent from a year ago to €1.07 billion ($1.2bn) in the first quarter, missing analyst estimates ranging from €1.19 billion to €1.82 billion. Mr Manley said a new Jeep pickup and heavy-duty Ram truck will boost sales and profit margins in the second half of the year.
“The results are slightly below my expectations but they’re not a significant surprise,” Marco Opipari, an analyst with Fidentiis in Milan, said by phone. “The market is more focused on guidance at this point.”
Fiat is counting on a boost from the new Jeep Gladiator and heavy-duty Ram pickup later this year as Manley seeks to address a lopsided business that generated almost no profit in Europe last year and lost money in China. Sales are flagging amid a broader slowdown in North America, which produces the lion’s share of the company’s profits. US deliveries slipped 3 per cent in the first quarter, with only the Ram brand posting volume growth, though higher prices are bolstering results.
Fiat Chrysler shares rose 2.6 per cent to €13.89 at 2:46 pm in Milan. The stock has lost 8 per cent in the past three months, versus a 3.3 per cent average gain among industry peers.
Mr Manley warned in February that the first half of 2019 would be weaker than a year ago because the company is no longer benefiting from selling two versions of its Jeep Wrangler -- the latest generation and a now-retired predecessor model.
Fiat’s business in Asia lost money for the fourth consecutive quarter as vehicle shipments fell 30 per cent in China. The company announced a restructuring of Fiat’s Chinese joint venture with Guangzhou Automobile Group this week, consolidating sales operations and appointing new leadership to “more rapidly respond” to changes in the local market. Jeep brand sales have been a disappointment in China, which is experiencing its first auto sales slowdown in almost three decades.
Europe lost €19 million in the first quarter as volumes sank and the company continued to search for cost cuts as tougher emissions regulations force the automaker to spend more on electrification. Mr Manley pointed to a plan to increase production of high-margin light commercial vehicles in Europe with Peugeot-maker PSA Group. The company is also exploring a partnership with PSA to collaborate on a "'super platform," Bloomberg reported March 30.
The company is at risk of paying fines to the European Union because it’s behind on new emissions standards that take effect next year. That prompted it to pool its fleet with Tesla, a multi-year deal that will likely cost Fiat hundreds of millions of dollars.
Mr Manley’s other turnaround project is the high-end Maserati brand, which saw global sales tumble 32 per cent in the first quarter and adjusted profit plunge 87 per cent to €11 million. He installed a new brand chief, CTO Harald Wester, in October to work on pairing back bloated inventories. That process should drag on through the first half of 2019, Mr Manley has said, and is also hampered by a lack of new products.
