Fiat Chrysler Automobiles reported Q2 earnings that were lower than expected, but that was surpassed by news that former CEO Sergio Marchionne died due to complications from surgery in Switzerland.
The company’s executives, including the newly appointed replacement for Marchionne, Mike Manley, soldiered on through the earnings call, starting with a moment of silence to honor the man many believe saved Chrysler from extinction.
Then they moved on, as they believed Marchionne would have insisted, to describe how slow sales in China put a drag on the company’s earnings results despite impressive sales in North America during the first half of the year.
FCA’s adjusted earnings before interest and tax (EBIT) for the second quarter fell 11% to 1.7 billion euros ($2 billion), compared with 2 billion euros in a Reuters poll of analysts. The result was a revision of its short-term forecast.
(Former FCA CEO Sergio Marchionne dead at 66. Click Here for the story.)
Officials said they expected 2018 net revenues of between 115-118 billion euros, down from a previous forecast of about 125 billion euros. Additionally, adjusted EBIT should come in between 7.5-8.0 billion euros from at least 8.7 billion. However, they also said none of their previous forecasts need to be revised.
It was a slump in Chinese demand last quarter ahead of a July cut in import duties, that pushed the company to offer higher incentives and an increase in unsold vehicles that “particularly affected Maserati,” Manley said.
Maserati sales were down 35% globally, but fell 65% in China, the world’s largest luxury car market.
Overall, FCA branded vehicles struggled as well. The company’s inventory rose from 98 days supply to 129 for Asia Pacific, will continue to impact results as stocks are cleared ahead of new emissions regulations, Manley added.
(Click Here for a look at the challenges facing new CEO Mike Manley.)
“China is a clear priority for me in the coming weeks,” Manley said during the analyst call. The company said it expected sales in China to move upward by the fourth quarter. The company noted its new China-specific Jeep, the Grand Commander, will be at full production levels then.
If would have been worse if not for the staggering performance of the company’s North American unit, specifically the U.S. where sales rose 8% during the quarter. Jeep sales were up 21% due to all-new Wrangler and Compass models. Ram sales were down 4%, but that was due largely to lower fleet sales. Retail Rams sales rose 5%.
Ram sales are expected to improve, said Manley as the new heavy-duty model ramps up production in the next quarter and the new light-duty truck continues its move toward full production. Manley said it’s currently at “80 to 85%.”
FCA officials reiterated 2022 goals set out by Marchionne in his last investor presentation on June 1, including a doubling of operating profit and a 9 billion-euro plan to catch up with rivals in hybrid and electric cars remain unchanged. Manley, in particular, noted his commitment to making it happen.
(To see what the new 5-year-plan holds for Jeep, Ram, Alfa and Maserati, Click Here.)
“My mandate is to deliver that five-year plan,” Manley said on Wednesday, stressing that the company would remain independent yet “flexible” about any new tie-up opportunities.