(Adds that launch of Cherokee delayed,)
By Jennifer Clark and Ben Klayman
MILAN/DETROIT, July 30 Fiat's U.S. unit
Chrysler, which generates most of the group's net profit, cut
its profit forecast as it struggled to fill orders due to parts
shortages, hitting the Italian automaker's shares.
Chrysler's booming U.S. sales have compensated for Fiat's
losses in Europe, where demand hit a 20-year low in the first
half of the year.
Fiat-Chrysler Chief Executive Sergio Marchionne said most of
Chrysler's plants had experienced parts shortages as it tried to
keep up with strong demand. That resulted in lost production.
Its competitors General Motors and Ford both
trounced expectations in their earnings releases last week.
Automotive supply chain glitches have proven a headache for the
much smaller and less diversified Chrysler, which is overly
dependent on Jeep and truck models to make money.
"We're trying to reduce the recurrence of these events, but
they keep on happening at a sufficient rate that we had to look
at the forecast and admit that the overall number that we had
set for the year may be at risk," Marchionne said on a
conference call. "That's why we've prudently taken it to the low
end of the range."
Chrysler trimmed its full-year net profit forecast to a
range of between $1.7 billion and $2.2 billion from a previous
estimate of $2.2 billion. It earned $1.7 billion in 2012.
Chrysler's production rate has gone from 1 million cars a
year in 2010 to 2-1/2 times that rate and the company will add
another 200,000 vehicles of annual output next year, Marchionne
said. That causes stress on the supplier network.
Chrysler confirmed that the critical launch of a new Jeep
Cherokee was delayed by a month to September to resolve
calibration issues with the SUV's new nine-speed transmission.
Shares in Fiat, which owns 58.5 percent of Chrysler and
plans eventually to merge the two carmakers, closed down 4.2
percent at 6.03 euros.
"The market didn't like the Chrysler profit warning," said
an analyst in Milan. "Chrysler's second-quarter results were
slightly better than expected, but the free cash flow was modest
and below our estimates. The news is negative."
In a separate statement, Fiat confirmed the combined group's
2013 financial targets and said Fiat's losses in Europe
narrowed in the second quarter to 98 million euros ($130
million) because of cost cutting, even as car shipments in the
region fell 5 percent.
Ford and General Motors also reduced their losses in Europe
in the second quarter, by cutting costs.
Chrysler said it saw worldwide vehicle shipments this year
of 2.6 million, at the low end of its previously forecast range
of 2.6 million-2.7 million. It confirmed revenue targets.
FIAT CONFIRMS INVESTMENT FREEZE
Net profit at Chrysler rose to $507 million in the second
quarter from $436 million a year before. The quarter included
increased pricing at Chrysler of $337 million due to the rollout
of newer vehicles like the Ram pickup truck and Jeep Grand
Cherokee SUV, which allows Chrysler to boost prices and cut
Marchionne said July would continue the trend of higher
Chrysler sales in the U.S. market and the outlook for the rest
of the year looked positive.
Fiat said its group trading profit - earnings before
interest, taxes and one-time items - was 1.03 billion euros
($1.37 billion), just above a consensus analyst forecast of 1
billion euros, as its Europe loss narrowed and sales in Asia
Fiat's net debt was 6.71 billion euros, against a forecast
of 7.1 billion euros.
Marchionne confirmed that Fiat was freezing plans to invest
billions of euros to build new Alfa Romeo and Maserati models in
Italy pending clarification of a recent court ruling that
declared part of Italy's labour laws unconstitutional.
A solution to the impasse will be discussed in an upcoming
meeting with Italy's industry minister, who has asked to see
Marchionne in early August. Marchionne will meet with Fiat's
unions on Friday in Rome.
Marchionne said no deal was imminent regarding the company's
desire to purchase the remaining 41.5 percent of Chrysler owned
by a trust affiliated with the United Auto Workers for former
The two sides disagree on the value of that stake and the
issue is simmering in a Delaware court with a ruling expected by
the end of July.
In the meantime, Chrysler is pushing forward with a plan
announced in January to sell 16.6 percent of its shares in a
public offering in the U.S. A filing with the U.S. securities
regulator for the listing could take place by the end of the
year, Chrysler-Fiat Chief Financial Officer Richard Palmer said,
and the IPO could take place three or four months afterwards.
($1 = 0.7545 euros)
(Reporting by Jennifer Clark, Ben Klayman, Stephen Jewkes and
Gianni Montani; editing by Anthony Barker and Tom Pfeiffer)