FCA CEO Sergio Marchionne told analysts and reporters that the new automaker is carrying a lot of debt, but it was necessary to ensure the company's growth.
Fiat Chrysler Automotive, the new name for combination of Fiat and Chrysler, will be carrying a lot of debt, Sergio Marchionne, the company chief executive officer warned during a conference call with analysts and journalists.
But the CEO of the newly merged and renamed automaker Marchionne insisted the debt is “benign” and required to press ahead with a broad corporate rejuvenation plan. Among Marchionne’s goal are the expansion of global sales of the Jeep brand, the broadening of the maker’s business in China and the rebuilding what was Fiat’s automobile business in Europe and elsewhere. Marchionne also wants FCA to be less dependent on “mass market” vehicles and instead sell more luxury models through its Alfa Romeo and Maserati channels.
Nevertheless, FCA reduced its guidance on 2014 profits, indicating net income will be 3.6 billion euros to 4 billion euros, or $4.9 billion to $5.4 billion. That’s well under the target set in 2012 for a profit of 4.7 billion euros to 5.2 billion euros. Fiat shares fell 4.1% on the news.
Chrysler’s fourth-quarter operating profit was $1.1 billion, an increase of 51%. Chrysler forecast operating profit this year in the range of $3.7 billion to $4 billion. Profit in 2013 was $3.18 billion.
But Fiat fourth-quarter income in Latin America dropped 82% to 44 million euros as Fiat faced stiffer competition from the likes of Volkswagen AG and Hyundai Motor Co. The Latin American drop swamped a profit gain in North America, where Chrysler’s performance was lifted by the new Jeep Cherokee, which began deliveries in October, FCA executives said.
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Marchionne blamed part of the problems on the economic uncertainty that prevails across Latin America, notably inflation and a devaluation of currency in Venezuela.
Chrysler, on the other hand, performed well during the fourth quarter, according to Kelly Blue Book Analyst Alec Gutierrez.
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“Chrysler saw market share improve by 0.5 points in the fourth quarter of 2013, more than any of their domestic counterparts. Not only did Chrysler enjoy healthy sales growth, they also saw transaction prices increase while incentive spend declined. Much of Chrysler strength has come from their Ram and Jeep brands which have enjoyed strong growth due to a host of successful redesigns and introductions,” Gutierrez said.
Marchionne said the automaker plans to move forward with construction of a new plant in Brazil and the refinancing of debt created by the acquisition of the remaining Chrysler stock held by the United Auto Workers Union’s VEBA. Until last week, when the sale of the stock to Fiat closed, the retiree trust fund owned 41.5% of Chrysler’s shares.
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Chrysler Group plans to offer up to $2.7 billion in aggregate principal amount of secured senior debt securities. Chrysler Group also announced plans to commence marketing additional senior secured term loan facilities to raise up to an additional $2.0 billion.
A new FCA logo was revealed on Wednesday to represent the new corporate identity of the combined organization. Use of an acronym helps create a transition from the past, without severing the roots, while at the same time reflecting the global scopeof the Group’s activities, Fiat Chrysler officials explained.