Fiat Chrysler no longer 'bleeding' in Europe, but challenges remain

Reuters

Published Jan 28, 2015 02:55PM ET

Fiat Chrysler no longer 'bleeding' in Europe, but challenges remain

By Agnieszka Flak and Bernie Woodall

MILAN/DETROIT (Reuters) - Fiat Chrysler Automobiles (N:FCAU) (MI:FCHA) expects to turn profits in all regions this year, but faces pressure to rev up its North American profit engine to fund an ambitious overhaul of its Alfa Romeo and Maserati brands.

For the first time since 2007, the company turned a profit in Europe in the fourth quarter. The company's strategy of retooling idled factories in Italy to export the Jeep Renegade small sport utility and other vehicles to the United States is getting a lift from the slump of the euro against the dollar.

"In 2015 ... we should see black numbers across all regions," Chief Executive Sergio Marchionne told investors during a conference call. Europe should see a recovery this year, he said, but cautioned: "I'm not opening any bottles of champagne."

FCA said capital expenditure this year will be as much as 9.5 billion euros ($10.77 billion), as it invests to develop new Maserati luxury cars, sporty Alfa Romeos and Jeeps. FCA shares rose more than 60 percent last year, boosted by the Chrysler buyout and the plan to spin off luxury unit Ferrari. The company's stock closed down 0.2 percent Wednesday at 11.56 euros.

FCA needs to keep profits spinning from its North America operations to pay for its product renaissance. Robust sales of Jeep sport utilities and Ram pickups contributed just over half of the company's overall profits and revenues last year, helping to offset a slump in Latin America and weakness in Europe.

However, FCA's 4 percent operating profit margins in North America lag well behind those of Ford Motor Co. (N:F) and General Motors Co. (N:GM) and have been under pressure in recent quarters, but should improve in 2015 due to lower expected recall costs and a more stable cost base than in the past five years, said Richard Palmer, FCA financial director.

FCA also will spend less to launch new models in North America.