Fiat-Chrysler makes bold forecasts for 2012

Automaker Fiat-Chrysler set out lower but still ambitious targets for 2012, with newly profitable Chrysler Group forecasting an 18 per cent jump in US revenue to make up for depressed conditions in Europe.

Chrysler said on Wednesday it swung to a full-year net profit of $183 million in its second year managed by Italy's Fiat SpA, a key milestone after it went bust in 2009 and was bailed out by US and Canadian taxpayers.

Fiat-Chrysler reported a fourth-quarter operating profit of €765m ($1.01 billion), bang in line with forecasts, with the US business increasingly offsetting European weakness, contributing €639m, or 84 per cent of the total, up from about two-thirds in the third quarter.

Fiat-Chrysler CEO Sergio Marchionne said on Wednesday that a scenario in which Chrysler did the heavy lifting on Fiat's bottom line "cannot be a long-term solution," however.

As expected, the transatlantic group cut forecasts for 2012 to reflect a worsening situation in Europe, but the new operating profit forecast of between €3.8bn and €4.5bn, down from previous guidance of 4.59bn to 5.27bn, was still well above the €3.18bn analysts predicted.

The new net profit guidance of €1.2bn to €1.5bn was also ahead of market consensus of €1.03bn.

"Recent events in the last 12 months, and more particularly in the last semester of 2011, have cast doubt on the volume assumptions governing the overall market and our own development plans for Europe until 2014," the automaker said.

The company's new guidance for 2012 revenue is at least €77bn, down from an earlier forecast of 85bn.

Fiat shares closed 5 per cent higher at €4.82, despite the target cuts and news that the company will not pay a dividend on ordinary shares in 2011.

"The stock has moved on the fact that Mr. Marchionne felt able to offer clear and ambitious guidance for 2102," said Citigroup analyst John Lawson in a note on Wednesday.

Fiat Group Automobiles (FGA), home to the Fiat, Lancia and Alfa Romeo brands, fell to an operating loss of €15m, well below the 105m profit expected.

FGA's fourth-quarter loss was attributed to lower sales volumes, and came as the passenger car market fell 3.4 per cent in Europe and 9.6 per cent in Italy, the company said.

The tough conditions may increase pressure on Fiat-Chrysler and other mass-market carmakers in Europe to seek alliances on products and platforms to cut costs.

Italian car sales fell 16.9 per cent in January, with Fiat's market share unchanged from the same month a year ago at 29.5 per cent. French car sales fell 21 per cent over the same month as a government incentive scheme was phased out.

Despite the bleak outlook in its home market, Fiat confirmed the production of two new Fiat and Jeep models at its Turin hub. Production will start respectively at the end of 2013 and in the second quarter of 2014, with targeted volumes of 280,000 cars a year.

Marchionne said last month Fiat-Chrysler may need a partner to meet its 2014 targets of selling 6 million cars and generating €104bn in revenue.

Investors also shrugged off a 2012 debt forecast that was higher than consensus.

Fiat-Chrysler said it sees net debt at between €5.5bn and €6bn at the end of 2012, compared with an expected €5.7bn average estimate from analysts. The company had total available liquidity of €20.7bn on hand at the end of 2011, which it said was a sufficient cushion to help it ride out a sharper than expected market drop.

Also on Wednesday, Chrysler Group LLC posted a 44 per cent rise in US auto sales in January, led by gains for its Jeep brand. The performance blew past analysts' expectations of a 35 per cent increase.