Fiat Chrysler CEO Sergio Marchionne's company took an $850 million charge related to recall costs.
Fiat Chrysler Automobiles NV posted loss in the third quarter after taking an $850 million one-time charge to cover costs linked to vehicle recalls in North America.
The net loss for the three months to the end of September totaled $330.4 million compared with a net profit of in the same period last year. On the bright side, the automaker’s revenue advanced 17% to more than $30 billion.
The $850 million pretax charge underscoring the impact that recalls had on the Italian-American automaker.
U.S. regulators in July whacked the Italian-American company with a massive fine of $105 million for the poor management of recalls covering millions of vehicles. U.S. authorities also forced Fiat Chrysler to take on an independent auditor, newly appointed former Transportation Secretary Rodney Slater, to monitor its safety practices.
Recent recalls have included one in July for 1.4 million Jeeps, Chryslers, Rams and Dodges for a software update after a controlled hack showed it is possible to take control of the vehicles remotely.
Fiat Chrysler said it also took a write down of $165 million in the third quarter for damage its vehicles sustained in the August port explosion in Tianjin, China. The company said it expects its insurance to cover those costs.
Adjusted net profit, which strips out one-time items, rose 32% in the quarter to $338 million as strong growth in the U.S. continued to make up for lackluster results in the rest of the world. For the quarter, the company posted an adjusted operating profit of $134 million in North America, lost money in Asia and made a small profit in Latin American and Europe.
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Though Fiat Chrysler is riding the wave of booming car sales in the U.S. as low gasoline prices fuel demand for sport-utility vehicles and trucks, the company’s profitability trails far behind GM and Ford, both of which reported record third-quarter results in recent days. Fiat Chrysler’s 4.7% operating margin in North America is less than half of what its two domestic competitors manage.
The $25 million Fiat Chrysler made in Europe in the three months to end-September is the fourth straight quarterly profit in the region after more than seven years of losses. The company said earlier it would turn a small profit in the region this year. In addition, the net profits of Ferrari, which completed a successful initial public offering of stock earlier this month, reported its earnings rose by 62%.
Ferrari’s revenue rose 9.2% to €723 million helped, in part, by currency fluctuations. Ferrari said it expects to sell 7,700 cars this year compared with about 7,200 last year
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As of last week, 10% of Ferrari is traded on the New York Stock Exchange following Fiat Chrysler’s sale of stock in an initial public offering. Fiat Chrysler still owns 80% of Ferrari, which it plans to spin off to its shareholders early next year, while the rest is held by one of Ferrari’s founder’s sons.
Fiat Chrysler confirmed its profit, revenue and debt guidance released three months ago with second-quarter results. The company expects to sell 4.8 million vehicles this year, compared with 4.6 million in 2014. Revenue is expected to reach $123 billion, 15% more than last year, while adjusted net profit is expected to be about $1.3 billion.
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Third-quarter worldwide shipments were 1.1 million units, in line with previous year. Jeep’s positive performance continued with worldwide shipments up 27%.