Fiat May Stumble, But Maserati Has Its Foot To The Floor – Forbes

Posted: Saturday, July 12, 2014

Investors aren’t convinced that Fiat Chrysler Automobile’s (FCA) long-term plan is viable, but its Maserati upmarket sports car subsidiary looks set fair to sell lots more cars and make some serious money.

Maserati CEO Harald Wester recently confirmed that the storied Italian company was on track to hit the global sales targets of 50,000 vehicles in 2015 and 75,000 in 2018. Sales reached only 15,400 in 2013. The targets include the current models – the Gran Turismo, Quattroporte and Ghibli, and later the new Levante SUV and Alfieri two seater coupe and cabriolet.

Macquarie Research analyst Jens Schattner is not a cheerleader for Fiat Chrysler, but is impressed by Maserati.

“Maserati will become a major earnings contributor over the period 2013-16 and as such represents an important source of additional earnings to partially offset the incredibly fast deterioration of Fiat’s profitability in Latin America,” Schnattner said.

Schattner said Maserati delivered 8,041 cars in 2014’s first quarter compared with 1,304 in the same period of 2013.

“Maserati seems to be well on the way to deliver on its ambitious medium-term targets,” Schattner said.

The Maserati Alfieri concept, at the Goodwood Festival of Speed on England's south coast

The Maserati Alfieri concept, at the Goodwood Festival of Speed on England’s south coast

Schattner said this means revenues will boom to more than six billion euros ($8.2 billion) by 2018, up from 1.7 billion ($2.3 billion) in 2013, with an EBIT (earnings before interest and tax) of well above 2013’s 10.3 per cent. He expects trading profit of 420 million euros ($570 million) this year – a 12.5 per cent margin, rising to 732 million euros ($995 million) in 2016 (14.0 per cent).

Meanwhile operating profit for Fiat in Latin America will dive to 168 million euros ($229 million) this year (2.0 per cent), revive a bit to 218 million euros ($297 million) in 2016 (2.5 per cent) compared with 2012’s 1.1 billion euros ($1.5 billion) (9.5 per cent) and 619 million euros ($840 million) (6.2 per cent) million in 2013, Schattner said.

International Strategy and Investment, commenting after news that Fiat Chrysler planned to raise as much as $5.4 billion by issuing new bonds by the end of 2015 and sell shares to U.S. investors where the company will be listed, said Fiat Chrysler is the most indebted car manufacturer.

ISI estimates FCA gross debt at more than $40 billion and pointed out that a reduction in this cost would add greatly to profit margins. ISI estimated that with average financing costs of 6.8 per cent last year, this cost the company about $2.6 billion.

Macquarie’s Schattner said Fiat has lagged behind its competitors in Europe with R&D spending, using only 3.6 per cent of revenues over the last eight years compared with a sector average of 5.1 per cent. Fiat will  have to spend more on R&D to catch up, while amortization levels will increase substantially too.

“Both trends will likely put meaningful pressure on Fiat Chrysler Automobiles’ margins until 2018,” Schnatter said. He also cut his forecast for FCA trading profit this year to just above the bottom end of the company’s guidance of 3.6 billion euros ($4.9 billion) to 4.0 billion euros ($5.4 billion).



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