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FCA: NA profits boost overall profits

by David Zatz on

FCA had a good third quarter this year, with North American profit margins setting a new record (10.2%, before tax and interest) that was well above the old record (8.4%) from Q2 2017. The company credited the increase to new Jeeps and Rams.

Those North American profits helped boost total earnings by 13% in this quarter. FCA’s Latin American operations recorded a profitable quarter, but the company lost money in Europe and Asia, partly due to money set aside for diesel lawsuits or fines. Overall, though, FCA reported that it had paid off $2.8 billion in debt, reducing net industrial debt to $215 million — close to Sergio Marchionne’s goal of zero by the end of the year. Debt would be even lower, but the company funded its pensions ahead of schedule by around $680 million.

Sales in dollars outpaced sales in units, rising 9% to $33 billion; that helped earnings (before tax and interest) rise to $2.3 billion.

Stockholders will benefit from the sale of Magneti Marelli, which brought in $7.1 billion: FCA is paying out $2.3 billion of that in special dividends. The rest will presumably go towards paying off debt.  The company has around $23 billion in liquidity.

The company sold around 8,800 Maseratis during the quarter, down 19% from the same period in 2017 (10,900). Revenue fell even more, down 23%, presumably due to a less favorable product mix. On the lighter side, Jeep shipments in EMEA (Europe, Middle East, Asia) were up by 29% (FCA overall sales in EMEA were down by 4% to 273,000).

For the first nine months of the year, looking at adjusted earnings before interest and taxes, the company earned €4.6 billion in North America, €258 million in Latin America, and €345 million in Europe, the Middle East, and Asia; it separately logged €103 million from Maserati and €354 million from Magneti Marelli, “net of inter-company eliminations.” The company lost €184 million in the Asia-Pacifica region and €165 million due to “other activites.” Net profit, before interest and taxes, was €5.26 billion (around $6 billion), up from €5.16 billion in the first nine months of 2017.

FCA does face headwinds; its success in diesels will carry a price in fines and penalties, along with lost sales as Europe, for one, moves from diesels to hybrids. FCA has already paid or put aside €713 million for U.S. diesel emissions matters. More to the point, the global auto market is expected to start falling somewhat following stock market shocks, and the impact of U.S. trade policy has yet to be fully seen.  This was, though, a good quarter, overall; FCA has slashed its debt and positioned itself fairly well for the future.

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