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Fiat profits fall 55% as Chrysler incentives, launches hurt bottom line.

5K views 50 replies 28 participants last post by  Ed753 
#1 ·
Detroit free press.
Fiat’s second quarter profits fell 55% during the second quarter as industry sales in South America fell and the cost of incentives and product launches in the U.S. hurt the company’s performance.

Sergio Marchionne, CEO of both Fiat and Chrysler, said Chrysler has lost discipline on its incentives in the U.S., partly because it still has a number of older models such as the Jeep Patriot, Jeep Compass and Dodge Caravan that have not been significantly updated for several years.

The automaker is forced to use higher incentives to support the sales of those models, Marchionne said.

“It is something that we obviously intend to remedy,” Marchionne told anaylsts during a conference call today. “I think we need to become a lot more disciplined on the pricing side of this.”

Fiat, Chrysler’s parent company, said it earned a net profit of 197 million euros ($264 million) for the three months ending June 30 compared with 435 million euros ($583 million) for the same period a year ago.

The automaker’s earnings before interest and taxes dropped to 961 euros ($1.3 billion) compared with 1.1 billion for the same period a year ago. The company’s profits dropped sharply even though total sales of cars and trucks increased 2% to 1.18 million.

Despite the profit decline, Fiat said it still expects to earn a profit of 600 million euro to 800 million euro ($800 million to $1.1 billion) for the year and increased its outlook for total sales of cars and trucks.

Marchionne said Fiat and Chrysler now expect to sell 4.7 million cars and trucks this year. Previoulsy, the company said it expected to sell up to 4.6 million cars and trucks.

Achieving that, however, will not be easy, Marchionne said.

“We had a crappy first quarter, a halfway decent second and we need to have outstanding quarters in the third and fourth,” Marchionne said.
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#3 ·
Not looking very good for Fiat/Chrysler, that is a huge drop! Hopefully they can stop the hemorrhaging quickly, this is a condition they need to get on top of.

I am sure that we will all be blessed with the rantings of a lunatic claiming that this is a bank/media smear job and how well FCA is really doing.
 
#19 ·
Do you even understand this report? a drop in profits is not "hemorrhaging" as in red ink. They're still profitable, and it's a matter of some concern, but hardly the 5 alarm fire narrative you're pushing in your post.

From the link:

Fiat, Chrysler’s parent company, said it earned a net profit of 197 million euros ($264 million) for the three months ending June 30 compared with 435 million euros ($583 million) for the same period a year ago.
 
#5 ·
I wonder if the incentives were thrown at the Ram to try and beat the Silverado. Sometimes the publicity of beating a rival is worth losing some $$. If they keep fixing problems like they did with the 200, Chrysler will do well. They need to continue to work on their lineup and get them ALL up to par with the rest of the world.
 
#6 ·
Well FCA is still has a bunch of lame products developed from the DaimlerChrysler and Cerberus eras. It seems that FCA is working as hard as it can to develop and roll out new vehicles though
 
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#10 ·
I don't think the launch of any new or redesigned Chrysler, Dodge, or Fiat passenger car since 2011 has gone well.
 
#15 ·
Sergio Marchionne, CEO of both Fiat and Chrysler, said Chrysler has lost discipline on its incentives in the U.S., partly because it still has a number of older models such as the Jeep Patriot, Jeep Compass and Dodge Caravan that have not been significantly updated for several years.
Admit it Sergio... you were buying market share by selling Rams dirt cheap.
If they reduce incentives the next question will be about declining sales. Well, we decided to quit giving them away!
 
#16 ·
I really like the new Ram trucks but, sadly, you're right. Some people talk here about how Ram is the real threat to Ford's marketshare but the reality is FCA is just buying it. About a year ago I was looking at a Ram 4x4 crew cab Big Horn with the 5.7, cloth interior, Protection Group, Remote Start, Rear Camera and Luxury Group. Sticker was a little over $40,000 and they gave me an OTD of high $28,000. Trouble was I didn't like the cloth color choices and there was no other option in cloth. The dealership told me they've had this complaint before and they had a local upholstery shop that would swap the cloth out and they would include this in the price of the truck.
 
#24 ·
People understandably look at some of FCA's activity as buying market share, and there probably is some truth to that. However, following bankruptcy and the bad press and being left for dead unless Fiat (of all companies) was willing to lend a hand was a pretty ugly time at Chrysler. And that's after getting raped by Diamler and skinned by Cerbus. So the fact that Chrysler has been very profitable AND has gotten American Buyers to come back and embrace their products - even if it took some agressive pricing at times isn't a bad thing in my book. PLUS, it's not like when you go to Chrysler-Jeep-Ram-Dodge dealer they're giving everything away. They have had to compensate for some old weak entries and they've needed to grease the wheels a bit. It's America. Money talks, B.S. walks.

They have the fastest growing brand in Jeep. They have amongst the youngest (mostly male) demographic in Dodge. They've got some mojo and money. This is hardly horrible.
 
#30 ·
I'll be curious to see if this is potentially an indication of monetary troubles due to some key product under-performing in the market moving forward. Jeep of course does well for FCA and Ram is making big strides in the pickup market, but Ram is a bit heavy on the rebates which has to be hurting ROI and Dodge has had one unmitigated disaster in the Dart and a solid 'meh' in the new 200 representing the two most important segments for cars in the U.S. market. Throw in the monetary issues Fiat was already having before getting into bed with Chrysler and this could be a blip or it could be a sign of bigger issues.
 
#34 ·
And how much will Q3 profits be off? - People arguing that FCA isn't buying sales are "disconnected"


Do you happen to have a link to the ad? Just curious. I tried TrueCar in several different zip codes and the most I'm seeing is $3k off MSRP. And the 2015 200 wasn't out 6 months ago, so I can assure I've been looking at the right ads. :p:

That was my point, 6 months ago it was $6,500 off of a 2014, this month its $6,500 off a 2015.


http://www.shumanmotor.net/ads.htm


And yes, the ads have asterisks, the same hoops you had to jump through 6 months ago.


I expected Chrysler to give me 25% off of a 2014, I didn't expect that off a just-out 2015.
 
#45 ·
What is the Dart's deal? Admittedly I haven't looked at them closely but they seem to be as good looking (or ugly depending on your perspective) as a Cruze or Focus, going by manufacturer specs they seem to be roomy inside and EPA estimates puts them in the ballpark of the competition. Pricing is undoubtedly on the Dart's side.
 
#46 ·
1) Its had internal competition from the cheaper (and bigger) 200 and Avenger.

2) Chrysler has kept it out of the rental lots, for the most part. (2013 Fleet Mix: Cruze 21.5%; Focus 26.4%; Dart 5.7%; 200 43.9%; Avenger 34.2%)

The majority of that fleet volume for these cars goes to the rental houses, only exception is the Ford Focus, which has a significant amount of Commercial and Government fleet business, with over 27% going there.
 
#50 ·
I don't see the problem with fleet business, commercial and government sales are usually good business
and provided that daily rentals are sold as trims similar to retail, it shouldn't affect resale values.
The thing to avoid is dumping base model strippers, today it's seen as a waste of resources.
 
#51 ·
Fleet and Commercial are typically years later and well used-up by the time they re-enter market, what is bad about rental is that to a rental car company, the car is simply a commodity, they want low prices, if you want to only give them higher trim cars, to better reflect your brand, have at it, but don't expect them to pay for it. (at least not dollar for dollar)

Then, because they get used so much, you'll have current model year cars, with 20,000 - 30,000 miles at significantly lower than new car prices, that puts downward pressure on new car prices (which forces incentives) and puts downward pressure on residuals, which make lease's more expensive (which then forces the Mfgs. to put rebate cash on leases too).
 
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