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FCA: loss due to Chrysler purchase, Europe

by David Zatz on

FCA-2014-moneyFiat Chrysler Automobiles, reporting as a combined company for the first time, announced that it lost money due to a one-time, $491 million charge for the purchase of the last chunk of Chrysler and associated costs. Debt is high, but overall the basics look good in the long term.

The Chrysler arm in North America recorded a loss of $163 million, versus a profit of $557 million in the same period last year; excluding the purchase of the remainder of Chrysler, there would have been a North American profit of $521 million. In Europe, the company lost around $163 million, narrowed from last year’s $149 million. Global revenue rose 12%, to $31 billion, with 9% more vehicles delivered (1.1 million of them). Overall, FCA lost $444 million in the quarter, but would have registered a profit of $99 million if not for the investment in Chrysler shares.

FCA’s stock price fell precipitously as analysts chose to doubt the Five Year Plan and due to quarterly performance below expectations, but at $10.74 per share (for FIATY, the U.S. sign) at the time of writing, the stock price is still far above its position six months ago. The stock market as a whole also fell, contributing to the drop.

Sergio Marchionne sent the following letter to employees:

The beginning of 2014 marked the birth of an exciting new global venture as we removed the final obstacle to the full and total operational integration of Fiat and Chrysler, each with its own unique heritage.

For the four and a half years leading up to that moment, we worked to create an organization that was truly unified in practice, even if not yet on paper, transforming differences into strengths and breaking down barriers of nationalistic or cultural resistance.

Sergio MarchionneWithout sacrificing the distinct identity of each group, we learned to share values and a commitment to building a common future.

Today we released the first quarterly results for the new group. Global revenues were up 12% over the prior year to €22 billion driven by a 9% increase in worldwide shipments to 1.1 million units.
Trading profit came in at €622 million, down 1% in nominal terms, but 6% better on a constant currency basis.

We ended the quarter with a net loss of €319 million, mainly related to a one-off charge in conjunction with the January UAW Memorandum of Understanding that paved the way for our total integration. Excluding unusual items, there was a net profit of €71 million, in line with prior year.

Looking at performance for our mass-market operations by region, in NAFTA we continued to outperform the market, with sales up 9% over the prior year. We have now increased sales year-over-year for 48 consecutive months in the U.S. and 52 straight months in Canada, where we finished the quarter as the market leader.

In LATAM, we registered positive results, although below the exceptionally strong performance in 2013. We maintained our leadership in Brazil, increasing our market share by 2.7 percentage points compared with the final quarter of 2013.

In APAC, we posted strong earnings on the back of significant volume growth. Our sales in the region, including JVs, were up 54% over the prior year, and our performance in all markets significantly outpaced the industry.

sergio marchionneIn EMEA, we reduced losses as a result of higher volumes, better product mix and increased efficiencies. At the Geneva Motor Show, we introduced the Jeep Renegade, the brand’s first ever small SUV that will be sold in more than 100 countries and is going to be a crucial contributor to the future growth of the brand, with the launch in European markets planned for September.

Our strategy to expand in the premium end of the market is yielding encouraging results. The Group’s Luxury Brands nearly doubled revenues and trading profit in the first quarter, led by the success of the Maserati Quattroporte and Ghibli.

Components also made a positive contribution, recording an overall increase in both revenues and trading profit.

We have eliminated the complexity and inefficiency involved in managing two separate organizations with different governance structures.

In creating the 7th largest automaker in the world, we have also created the conditions to forge something special on both the industrial and human level.

Your passion and determination have brought us to this point, making the integration of Fiat and Chrysler a working reality even before completion of the legal process.

As Fiat Chrysler Automobiles, we are now one global group, bound together by a common set of values, challenges and ambitions.

The future is limited only by our courage and our ability to dream big. Let’s seize the opportunity.

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