Fiat Chrysler Shares Tumble on Growth Prospects – Wall Street Journal

Posted: Friday, January 15, 2016

DETROIT— Fiat Chrysler Automobiles
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NV shares tumbled Friday and have shed a quarter of their value since the beginning of the year as investors question the Italian-American car maker’s growth prospects, even as it posts record sales.

The shares hit a 52-week low, dropping as much as 4.6% in New York before staging a small rebound.

Chrysler Chief Executive Sergio Marchionne has long faced a litany of headwinds, but they have come to the fore this month following the spinoff of Ferrari
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NV, which was one of the group’s major sources of profitability. With Fiat Chrysler no longer owning the luxury sports car maker, investors have turned their focus to the company’s struggling remaining brands.

Attempts to relaunch key brands like Alfa Romeo have so far been unsuccessful, and though the company’s care sales are growing faster than any major competitor in the U.S., its main market, profitability is barely half of local rivals General Motors Co.
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and Ford Motor Co.
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With Brazil tanking and Europe little more than break-even, Fiat Chrysler’s other two large markets offer weak prospects.

The most recent plunge in Fiat Chrysler’s stock comes the day after it emerged that an Illinois car dealer sued the company for allegedly encouraging dealers to falsify their vehicle sales numbers. The suit claims Fiat Chrysler used “strong-arm” tactics to get dealers to falsify sales reports to benefit the auto maker. Fiat Chrysler said the suit is “without merit.”

“The press should not be used in litigation matters,” said Mr. Marchionne on the sidelines of a conference in Detroit. “The press has to be careful about getting into issues like this between a dealer and a company.”

He blamed the drop in Fiat Chrysler’s share price on the general malaise of the auto sector, which he said needs to provide more information to assuage investors who feel threatened by the changes the industry is facing.

“We created hype around this problem of connectivity, autonomous driving and emissions,” said Mr. Marchionne. “We have created a lethal cocktail of elements. That is why there is uncertainty.”

Other auto stocks have also performed poorly recently due to continued jitters linked to the Volkswagen AG
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emissions scandal. Renault SA
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shares plunged as much as 20% Thursday in Paris after it emerged that France’s antifraud authority launched an emissions investigation into the company and other car makers. The shares made up half the lost ground by the end of Thursday’s session, but lost another 3% on Friday.

Fiat Chrysler’s share drop Friday also came amid a general selloff of stocks around the world as investors remained skittish due to the recent drop in oil prices and the fresh questions marks surrounding the Chinese economy. All major markets tumbled in Europe and both the Dow Jones Industrial Average and the S&P 500 were down more than 2.5%

Fiat Chrysler’s stock has also lost much of its speculative appeal as it has become clear that Mr. Marchionne is unlikely to succeed in the near future in finding a merger partner. He has said several times in the past few weeks that linking up with a rival is no longer a top priority as he turns his attention instead to reaching his financial targets.

Adding to Fiat Chrysler’s woes is a huge debt load—while GM and Ford are awash in cash—more than 11 million vehicle recalls in the U.S. last year, and an increasing inventory of unsold vehicles.

That and the fact that following the spinoff of Ferrari Fiat Chrysler is almost entirely dependent on its Jeep brand for sales-volume gains has many analysts forecasting that Mr. Marchionne won’t meet ambitious five-year targets he set in 2014 even as the company rides the wave of 69 straight months of gains in vehicle sales. A centerpiece of the plan is for vehicle sales to rise 59% to 7 million in 2018.

Mr. Marchionne is due to give an update of the play Jan. 27 when fourth-quarter results are released.

Write to Eric Sylvers at eric.sylvers@wsj.com and Jeff Bennett at jeff.bennett@wsj.com

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