Despite increasing its marketshare by a full point last year, the former Chrysler Group saw earnings decline.
Despite increases in shipments, sales, marketshare and revenue, FCA US, the former Chrysler Group, saw its overall profits drop substantially in 2014 due to the completion of Fiat’s takeover of Chrysler.
FCA US reported full-year net income of $1.2 billion compared with net income of $2.8 billion in 2013. The maker’s fourth quarter net income was $669 million, down about two-thirds from $1.6 billion during the same period last year.
The company took a hit this year on $1.2 billion in “unfavorable infrequent items,” such as the costs associated with the Fiat takeover Chrysler. Conversely, last year’s results benefitted from $962 million related to the release of valuation allowances on deferred tax assets.
When compared apples-to-apples, adjusted net income for 2014 was $2.4 billion, up 31% from $1.8 billion in 2013. For 2014, the adjusted net income figure excludes a $504 million loss on extinguishment of debt related to the prepayment of a note held by the UAW Retiree Medical Benefits Trust and a $672 million charge for commitments associated with the January 2014 memorandum of understanding signed with the UAW.
The company saw a lot of positives in 2014. The automaker reported shipments increased by 12% in 2014, boosting its U.S. marketshare by one percentage point to 12.4% and revenue while interest expense also fell by more than 15%. Interest expense for the year was $842 million, down from $1 billion in the prior year, primarily due to the refinancing of the VEBA Trust Note in January 2014 and debt re-pricing actions in 2013.
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Revenue also increased to $23 billon from $21.2 billion in October-December period as well as for the full year: $83.1 billion compared with $72.1 billion in 2013. The year-over-year improvement was driven by increased shipments of vehicles such as the Jeep Cherokee and Ram pickups.
Buoyed by sales of Jeep brand vehicles, which topped 1 million units for the first time in history. worldwide sales were 2.8 million vehicles for the year, up 15% from 2.4 million vehicles sold in 2013, driven largely by an 18% increase in the company’s operations in the U.S.
Worldwide shipments, a figure that includes vehicles in transit, were 2.9 million vehicles for the year, including 49,000 contract manufactured vehicles, an increase of 12% from a year earlier, when the company shipped 2.6 million vehicles, including 60,000 contract manufactured vehicles.
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FCA US, which must publish a separate financial report to satisfy bond holders – a requirement Fiat Chrysler chief executive Sergio Marchionne is eager to drop, claimed a modified operating profit of $3.5 billion for the year, up 10% from $3.2 billion in the prior year. However, the modified operating profit represented a smaller percentage of the company’s overall revenue, 4.2% compared to 4.4% of net revenues in the previous year.
The increase was mainly the result of higher shipment volumes, improved net pricing and purchasing efficiencies, partially offset by higher industrial costs mainly related to base material costs for vehicle content enhancements, as well as higher warranty and recall costs, Chrysler said.
Modified earnings before interest, taxes and amortization was $6.4 billion for the year, up 8% compared with $5.9 billion a year earlier. But EBITDA also represented a smaller percentage of revenue 7.7% compared to 8.2% of net revenues.
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Cash at Dec. 31, 2014, was $14.5 billion, up from $13.6 billion at Sept. 30, 2014, and $13.3 billion at Dec. 31, 2013. Total available liquidity as of Dec. 31, 2014, was $15.8 billion, including $1.3 billion available under an undrawn committed revolving credit facility. The increase in cash also included the $1.9 billion special distribution paid to Fiat and the VEBA Trust last January. Free cash flow for the year was $3.3 billion.
Financial liabilities at Dec. 31, 2014, totaled $12.8 billion compared with $12.9 billion at Sept. 30, 2014, and $12.3 billion at Dec. 31, 2013. The increase from a year ago was primarily due to the refinancing of the VEBA Trust Note in the first quarter of 2014. Net industrial cash increased to $1.8 billion at the end of 2014 from $680 million at Sept. 30, 2014, and $1 billion at Dec. 31, 2013.