Updated Fiat Chrysler plan ups 2018 financial targets – The Detroit News
Fiat Chrysler Automobiles NV is increasing several financial targets as part of an update to its five-year business plan through 2018.
Target changes from the original May 2014 plan include: Net revenue of roughly 136 billion euros in 2018, up from 129 billion euros; operating profit (adjusted earnings before interest and taxes) of 8.7 billion-9.8 billion euros, up from 8.3 billion-9.4 billion euros; and adjusted net profit of 4.7 billion-5.5 billion euros, an increase from 4.5 billion-5.3 billion euros.
“We have been able to accomplish a lot in less than two years,” Marchionne told financial analysts and news media Wednesday. “We’ve upgraded guidance on all the key metrics.”
Marchionne added that achieving the 2014 and 2015 goals outlined in the original plan “are not inconsequential.”
Positive gains contributing to the changes include financial gains from the spin-off of Ferrari; North American profit margins already at 2018 plan level; and stronger global performance for Jeep than anticipated. Market conditions also recovered more quickly in Europe than expected.
The increases may come as a surprise to some analysts, many of whom were skeptical of the targets when they were first announced.
Product changes under the revised plan include increasing production expectations of Jeep from 1.9 million to 2 million through 2018, while reducing its product investment and focus on Alfa Romeo.
“The commitment to the overall brand remains in place, as does the product strategy,” said Fiat Chrysler Chief Financial Officer Richard Palmer, adding the company has switched Alfa’s product cadence to focus initially on North America and Europe rather than China.
The original plan was to invest 5 billion euros ($6 billion) in Alfa for eight new models to spur sales from 74,000 in 2013 to 400,000 by 2018. The first of those products — the Giulia midsize sedan — is expected in dealership later this year after months of delays.
The planned product portfolio for Alfa Romeo under the new plan will be completed by mid-2020, with focus on Europe and North America. The presentation does not outline sales expectations for the famed luxury brand.
The Jeep and Alfa Romeo product changes were expected.
Fiat Chrysler did not provide a sales outlook for Alfa Romeo or any of its brands besides Jeep in the updated plan through 2018 as part of a renewed focus on profits over sales.
Marchionne said a target for the company’s vehicle sales to hit 7 million in 2018 from the original plan “doesn’t matter.”
“It was substantiating, or supporting, a view of market as we saw them back in ’14,” he said. “We have readjusted all of our plans to reflect current market conditions. … We are going to stay away, going forward, from enunciating goals that relate to volumes because the real key issues for us is the achievement of the financial metrics.”
Fiat Chrysler says it will shift capacity of its plants to produce more pickups and Jeeps by the end of 2017 to meet demand.
Marchionne did not give guidance on what plants will be impacted by the shifts, as many expected him to. He did emphasize that Fiat Chrysler would capitalize on Jeep, while raising doubts about producing the compact Dodge Dart and Chrysler 200 midsize sedans in the United States.
“There has been, in our view, a permanent shift toward SUVs and pickup trucks,” he said, adding the company has had trouble meeting demand. “So one of the things that we’ve decided to do is to essentially de-focus, from a manufacturing standpoint in the U.S. … the passenger car market.”
Marchionne said the Dart and 200 in-particular “will run their course,” and Fiat Chrysler will use that plant capacity to “try and deal with the development of both Jeep and the Ram brand.”
The company, according to Marchionne, is in continuing discussions with potential partners to “provide a product from their facilities that will allow (the company) to cover the market.”
Having other automakers build those cars would be different than plans reported by media outlets in September that Fiat Chrysler would move nearly all domestic car production to Mexico, and fill the voids left on American assembly lines with more-profitable SUVs and pickups. A company spokesperson declined to comment on partnerships or shifts in production.
Those reports said production of the Ram 1500 pickup was expected to move from Warren Truck to the Sterling Heights Assembly Plant; production of the Chrysler 200 in Sterling Heights would go to Mexico; and the upcoming Jeep Grand Wagoneer would be built at Warren.
Dodge Dart production, currently in Belvidere, Illinois, also was expected to move to Mexico. The Illinois plant makes the Jeep Compass and Jeep Patriot, but those vehicles are being phased out later this year. The Jeep Cherokee, which Marchionne previously confirmed, will leave the Toledo Assembly Complex to make more room for the Jeep Wrangler, including a pickup model.