Milan: Italian auto group Fiat was saved from loss in the third quarter by a strong recovery at its US unit Chrysler, which is now heading for about a third more annual profit than the parent company.
Chrysler reported a 22 percent jump in net profit to $464 million (337 million euros), while Fiat overall saw its net profit rise by 11 percent to 189 million euros.
Stripping out Chrysler, Fiat suffered a loss of 247 million euros, which is a drop of 37 million euros in the same quarter last year.
Fiat took a 20-percent stake in the third largest US automaker in 2009 as part of Chrysler’s bankruptcy and restructuring.
What was originally seen as a risky bet for Fiat — the German automaker Daimler had failed to turn around Chrysler — has paid off handsomely as Chrysler’s sales are now booming after decades of turbulence and decline.
Chrysler’s profits have been keeping Fiat in the black amidst a deep downturn in Europe, and Fiat chief Sergio Marchionne has been steadily expanding Fiat’s stake in Chrysler, which now stands at 58.5 percent.
His goal is to create a global player with the capital and volume to compete with the likes of Toyota and General Motors.
Despite the rise in third quarter profit, Fiat lowered Wednesday its earnings forecast for 2013 to between 900 million and 1.2 billion euros for this year, down from the range of 1.2-1.5 billion euros it had signalled earlier.
Chrysler is heading for annual earnings a third higher than its parent, forecasting net profit of 1.2-1.6 billion euros for the year.
In a conference call with journalists on Chrysler, Marchionne, who is also chief of Chrysler, expressed satisfaction with the results.
“From an overall performance standpoint I’m quite happy with what we’ve done,” he said. “Margins are up.”
Chrysler’s sales in the third quarter jumped by 13.5 percent to 12.8 billion euros and adjusted operating profit rose by 22 percent to 626 million euros.
Fiat said group shipments of vehicles was stable in the third quarter, while revenue increased just 1.4 percent in nominal terms to 20.7 billion euros due to negative currency effects.
It now expects 88 billion euros of revenues for the year, down from the 88-92 billion it had earlier forecast.
Fiat’s shares plunged by 4.1 percent to 5.59 euros in afternoon trading.
Marchionne declined to comment on an initial public stock offering that Chrysler reluctantly filed papers for last month after Fiat failed to reach an agreement with a workers’ trust fund on buying its shares.
Marchionne has repeatedly said he hoped to avoid an IPO as Fiat seeks full ownership of Chrysler, and it could still reach a deal with the UAW Retiree Medical Benefits Trust — known as the VEBA Trust — before a stock listing.
While helping engineer Chrysler’s rebound, Fiat has had difficulty emulating it at home.
Not only does the European car market remain near a 20-year low, leaving manufacturers stuck with overcapacity,Fiat does not have the flexibility to cut wages and production that Chrysler had when it went through bankruptcy.