Wednesday July 22, 07:05 PM
Fiat extends losses but is upbeat on prospects for Chrysler
MILAN (AFP) - Italian auto giant Fiat (Milan: F.MI - news) said Wednesday its first quarter losses extended into the April-June period but predicted a positive outcome to the year and foresaw a return to profit for its struggling US partner Chrysler (Xetra: 710000 - news) .
Fiat boss Sergio Marchionne in a conference call with analysts also said it was "inevitable" that Fiat Group Automobiles would be detached from the rest of the Fiat group to stand alone.
The auto maker reported that it had suffered a second quarter net loss of 179 million euros (254 million dollars) compared with a profit of 646 million euros a year earlier.
The loss eclipsed the 110 million euros expected by Dow Jones Newswires in a consensus forecast.
But Fiat said it still expected to achieve a trading profit of more than one one billion euros over the year and a net profit greater than 100 million, the company said.
Hard hit by the global financial crisis like the rest of the auto sector, Fiat went into the red in the first quarter, recording a loss of 411 million euros (584 million dollars) in what it called an "extremely difficult trading environment".
It was the first loss since the group returned to profitability in early 2005 after four years of red ink.
The loss continued in the second quarter when trading profit, Fiat's key profitability indicator, fell 72.5 percent to 310 million euros, while sales fell 22.5 percent to 13.18 billion euros.
"Aggressive cost containment measures and rigorous management of the group?s operating leverage limited the impact of the significant drop in demand," the company said, adding that the group still expected to finish the year in positive territory.
Marchionne in a later conference call with journalists focused on prospects for Chrysler, with which Fiat has been allied since June.
"I'm very confident that the measures we are putting in place will put Chrysler out of the crisis," said Marchionne, who has taken charge of the struggling US manufacturer.
"We'll begin to see the impact of the technology transfer in the last part of 2010," he added, referring to the expertise Fiat has begun providing Chrysler under the partnership.
The technology will allow the Detroit (DETROIT.SN - news) automaker to meet upcoming emissions and fuel economy standards and expand its product offerings.
"I've no doubt that Chrysler will be profitable," Marchionne said, cautioning however: "It is too early to talk about profit margins for Chrysler."
The Italian-Canadian chief executive credited with turning Fiat back from the brink of bankruptcy in 2004 said Chrysler "does need to go public at some point".
Fiat acquired a 20 percent stake in Chrysler in exchange for sharing its technology. The stake will rise to 35 percent and eventually to a majority position as long as targets mandated by the deal are achieved and US government funds provided Chrysler are repaid.
The deal gives the Italian auto maker access to the lucrative US market and brings it closer to economies of scale, which Marchionne has said are necessary to compete in the global automotive industry.
Marchionne also said that Fiat's automobile unit was destined for an independent existence.
"That move is inevitable," Marchionne asserted.
"It may take two years, three years to be done, but I think (at some) point of time that Fiat Group Automobiles will have a sufficient size to justify its stand-alone existence."
Fiat Group Automobiles markets the Fiat, Lancia and Alfa Romeo brands. Besides automobiles the overall group makes buses, trucks and farm and agricultural machinery.
Fiat's share price shed 1.7 percent Wednesday to 7.805 euros in the biggest drop on the Milan stock market.
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