Fiat Chrysler Automobiles on Thursday said fourth-quarter net profit doubled from a year earlier and gave a rosy outlook for 2017, forecasting that its closely watched debt should be cut by almost half.
Continue Reading Below
Net profit rose to EUR409 million ($438.74 million) in the three months to end-December from EUR196 million in the same period in 2015, when Fiat Chrysler booked extra costs to adjust production in the U.S. That move was part of a plan to stop building cars and move exclusively to sport-utility vehicles and pickup trucks there. Adjusted operating profit, which strips out one-time items, was little changed in the fourth quarter while revenue rose 1% to EUR29.72 billion
Fiat Chrysler is seen as one of the big winners if President Donald Trump goes through with plans to weaken environmental regulations that are forcing car makers to make large investments to improve fuel efficiency. Last year, the company made 85% of its profit in North American with the bulk of that coming from the U.S.
Chief Executive Sergio Marchionne has said the move in consumer preference in the U.S. to SUVs and trucks is permanent and will survive any eventual rise in gasoline prices. Fiat Chrysler's shift to concentrate in the U.S. exclusively on SUVs and trucks has generally been cheered by analysts who see most growth coming from those vehicles, but some have questioned how the company will hold up in the onslaught of new offerings from U.S. and foreign manufacturers.
Jeep, the company's iconic maker of SUVs that includes the Grand Cherokee and Wrangler, had a record 2016, selling 1.4 million vehicles world-wide, yet sales dropped in the U.S. in each of the last four months of the year. With the wider U.S. market near its sales peak--most forecasts are for a small drop this year after a record 2016--Jeep has been concentrating its efforts on international expansion with a particular focus on China.
While the Trump administration is likely to lessen environmental regulations and has said it wants to work the car industry--Mr. Marchionne and his counterparts at Ford Motor Co. and General Motors Co meet with Trump this week--the new president remains a wild-card. President Trump has said he would put a 35% tariff on cars made in Mexico and sent north for the U.S. market, a move that would be a blow to all three Detroit car makers.
Continue Reading Below
Mr. Marchionne said earlier this month that sufficiently high tariffs could force the shuttering of some Mexican factories.
Fiat Chrysler is also facing the specter of a fight with U.S. regulators after the Environmental Protection Agency earlier this month accused the company of using software to mask the true emissions of some Jeep and Ram vehicles. Mr. Marchionne has vigorously denied the allegations.
The company forecast 2017 revenue of at least EUR115 billion and adjusted operating profit of at least EUR7 billion. Debt is forecast to falling almost by half to less than EUR2.5 billion, below the estimates of most analysts. Mr. Marchionne has promised to wipe out the debt and have net cash of at least EUR4 billion at the end of 2018.
Fiat Chrysler sold 4.7 million vehicles world-wide in 2016, about the same as the previous year.
The company's shares, which have risen by two-thirds since the U.S. election, rose further Thursday as Fiat Chrysler booked its eight-straight day of gains. The shares are up 2.5% at EUR10.45 in early afternoon trading in Milan.
Write to Eric Sylvers at email@example.com