Fiat Chrysler shares tumble on guidance

INVESTORS EXPRESS DOUBT OVER ACHIEVABILITY OF 2020 GOALS

F(FCA) shares fell 12 per cent on Thursday after weaker-than-expected guidance for profits and industrial free cash flow this year raised doubts about the Italian-American carmaker’s longer-term targets.

Chief executive Mike Manley sought to persuade investors that the 2020 goals — set by late boss Sergio Marchionne — were still achievable, especially if the carmaker’s North American profit engine keeps spinning, new product launches lift margins and steps to fix weaknesses elsewhere pay off.

“I wouldn’t put 2020 out of the picture. It’s something that’s still very much there,” Manley told analysts on a call, adding the pending launches of the new Jeep Gladiator and Ram heavyduty pickup would help drive sales.

But the comments did little to reassure investors who worry about FCA’s over-reliance on one region, its weak performance in China and persistently low profitability in Europe.

Weaker margins in North America in the last quarter compared with the previous three months also raised concerns, especially given stiff competition in the SUV and truck markets, and the fact U.S. demand is starting to slow.

“The U.S. market remains key for near-term growth,” said Evercore ISI analyst Arndt Ellinghorst, adding he would be watching how the sales of higher-margin pickups and utility vehicles develop in the second part of 2019 and next year.

Milan-listed FCA shares closed down 12.2 per cent, their biggest daily drop since a profit warning on July 25, when the news of Marchionne’s death was also announced. Thursday’s share drop also weighed on rivals General Motors and Ford.

FCA promised in June to deliver 2020 adjusted earnings before interest and tax (EBIT) — excluding the Magneti Marelli unit it has agreed to sell — of 9.2- to 10.4-billion euros (US$10.4to $11.8 billion).

On Thursday, the world’s seventh-largest carmaker said it expected 2019 adjusted EBIT of more than 6.7 billion euros. That is below analysts’ average forecast of 7.3 billion euros and suggests little improvement on 2018, when FCA posted an adjusted EBIT on the same basis of 6.7 billion euros.

Capital spending is forecast to rise this year and next. FCA’s global portfolio lacks a mid-size pickup, a product the company had promised by 2022, and Manley said the firm was still considering whether to approve production.