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Why is FCAU down?

by David Zatz on

FCA itself described some of the reasons why the company’s stock is down despite better than expected profits and debt reduction.

On the one hand, margins in North America are well ahead of schedule, Europe/Middle East/Africa is profitable a year ahead of the plan, and Jeep has been beating expectations.

FCA

The down side starts globally: industry sales in Brazil, one of the company’s best markets, have fallen, and nobody knows when the situation is likely to turn around. The Chinese market fall has hurt Maserati and Alfa Romeo’s growth and market plans.

There have been more recalls done at higher cost, and regulations are getting tighter. The Volkswagen scandal is likely to hurt FCA as much as VW, though FCA is apparently blameless, with new conditions of sale, and terms of the settlement with the US government over recalls may be fairly difficult to achieve.  Finally, analysts do not expect the North American market to continue anywhere near its current strength.

Breaking down the wall between the former Chrysler and the former Fiat means the company can get better terms on its loans, a huge savings with over $5 billion in debt. The dark side of this is that the company has over $5 billion in debt heading into what might be a global slowdown.

FCA is currently selling at $7.57 per share, down four cents from the opening; it has been slowly climbing up. [Update, February 1: FCA closed at $7.01 per share.]

David Zatz founded Allpar in 1998 (based on a site he had begun in 1993-94), after years of writing reviews for retail trades. He has been quoted by the New York Times, the Daily Telegraph, the Detroit News, and USA Today. Before making Allpar a full-time career, he was a consultant in organizational psychology. You can reach him by using our contact form (much preferred) or by calling (313) 766-2304


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