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Fiat Sticks to Profit Target

October 19, 2011
3 min to read


TURIN - Fiat SpA's chief executive Wednesday stuck to his 2011-12 financial targets despite the weakening market in Europe, saying the Italian auto maker was doing well elsewhere, especially Brazil and the U.S.


"There's no need to change the numbers," Sergio Marchionne told reporters after the presentation of the Thema sedan and Voyager minivan, two new models for Lancia, Fiat's small but upscale brand in Europe.

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Fiat has revised its 2011 targets after taking control of its U.S. partner, Chrysler Group LLC, reported The Wall Street Journal. It expects an operating profit before exceptional items of €2.1 billion ($2.89 billion) on revenue in excess of €58 billion, including Chrysler's contribution. The targets are only slightly higher than those achieved in 2010 because Fiat spun off its truck and tractor business into Fiat Industrial SpA at the end of that year.


Fiat has yet to publish a revision of its 2012 targets to take into account Chrysler.


"The good thing about at least parts of our business is that they are in cash-generation mode. The U.S. is in good shape. Latin America is in good shape. Europe continues to be a big area of concern," he said.


In the first nine months of the year, Fiat, which now includes the Chrysler and Jeep brands in its numbers, suffered the biggest drop in unit sales among the region's mass car manufacturers, down 12 percent to 735,494, according to industry figures. Its market share fell to 7.3 percent from 8.2 percent compared with a year earlier. By contrast, sales at Volkswagen AG grew by 7.9 percent.


Fiat makes nearly all of its profits in Brazil, where it is the market leader, and its merger with Chrysler has reduced its dependence on Europe.

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Mr. Marchionne highlighted the difficulties Fiat faced in Europe this year and the next, especially in Italy, its biggest single market in the region. "This country right now is in gridlock and you need something to snap it out of its stupor," he said of Italy, where Fiat commands a 30 percent market share.


Mr. Marchionne said a strike at Fiat plants called for Friday by Fiom, a small but influential union in Italy, would hurt the country's image as a place to invest rather than the auto maker itself.


In the U.S., Chrysler, where Mr. Marchionne is also chief executive, has reached a tentative agreement on a new labor contract with the UAW. For it to become effective, the union must get its members' approval.


"I am hopeful and confident that we will it through," he said in reference to the UAW vote. "I think our people understand that this is the best thing I could achieve under the circumstances.


"The UAW and ourselves hammered out the best possible deal that we could...we know the limitations," he added.

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Mr. Marchionne said he wasn't surprised by Tuesday's downgrade of Fiat's debt rating by Fitch Ratings Inc. the last of the three major agencies to do it.


"We have enough liquidity to deal with our requirements for quite a while." By the end of the year, Fiat aims for €18 billion of cash and up to €5.5 billion in net industrial debt.

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