Fiat: Japan quake could cut European volumes
In this photo made on Feb. 10, 2011, shows a Fiat 500, at the opening of the Pittsburgh International Auto Show, in Pittsburgh. Italian automaker Fiat Spa said Wednesday, April 20, 2011, first-quarter profits were Ä29 million ($41.5 million), compared with a loss a year earlier, on increased sales of luxury brands and strong performance in the components business.(AP Photo/Keith Srakocic)
MILAN - Italian carmaker Fiat Spa said Wednesday that interrupted delivery of high-end radios and satellite navigation systems from Japan could result in a production drop in Europe of 50,000 to 100,000 units this year as the disruption from the March 11 earthquake and tsunami continue to spread through the industry.
CEO Sergio Marchionne told analysts that most of the impact from Japan's supply chain break would be felt in the first and third quarters — and that he expects a return to normalcy by October 2011.
"The situation in Japan is constantly evolving, it changes day by day. We have seen the situation improve drastically over the last 2 1/2 weeks," Marchionne said.
He added that supplier bases had "very effectively" searched for alternative solutions, either looking for ways to bring the plants back on line or identifying other supply bases.
Even taking into account the production losses, Marchionne said Fiat SpA could achieve targets for the year already laid out. They include trading profit — or earnings before interest, taxes and one-time items — of between €900 million and €1.2 billion on revenues of about €37 billion ($53.71 billion).
Fiat, which controls a 30-per cent share of Chrysler, has previously said that the earthquake in Japan is expected to increase prices on some Chrysler models due to delays in component supplies, mostly high-end electronics. Chrysler also has had to ration certain colours of paint because of a pigment produced in Japan. It will release more details with earnings on May 2, Marchionne said.
Toyota has announced it will temporarily suspend or slow production in Europe and North America due to the quake impact, and has shut down most production in Japan. Ford Motor Co. and Nissan Motor Co. recently said that several North American plants would be closed for part of this month. Chrysler Group LLC is cutting overtime at plants in Canada and Mexico to conserve parts from Japan.
By now, most models from the popular 500 city car, now on sale in North America, to higher end models carry some form of specialized electronics hailing from Japan.
Marchionne spoke to analysts Wednesday after Fiat announced a return to first-quarter profits.
Shares of Fiat SpA — the automotive unit that since Jan. 3 has been decoupled from Fiat Industrial farm, construction and truck business — closed up 4.61 per cent to €6.575.
Fiat made a net profit attributable to majority shareholders of €29 million ($41.5 million) while revenues rose 7 per cent to €9.2 billion. Luxury brand Ferrari and the Magnetti Marelli components business saw double-digit gains.
"Given the state of the European car market, I think that the results for Fiat for the first quarter of 2011 are more than satisfactory," Marchionne said.
Fiat's Group Automobiles, the unit which groups the Fiat, Alfa Romeo and Lancia brands, saw a 2.6 per cent increase in revenues to €7 billion. But that was largely due to light commercial vehicle sales, which "offset what has been unacceptable, to me, performance of automotive in Q1 in Europe," Marchionne said.
It is the company's first quarterly earnings report since the January spinoff of the industrial unit, which makes trucks and farm and construction vehicles. Fiat Industrial reports earnings Thursday.
The demerger was designed to would free up the vastly different industrial and car businesses to pursue their own strategies and industrial tie-ups. Fiat SpA since the demerger is focused on cars, light commercial vehicles and related components.
Fiat trading profit rose 9 per cent on the year while Fiat Group Automobiles saw its trading profit fall 15 per cent as European volumes declined and investments in new models increased.
The car business shipped 245,300 units, down 11 per cent on the year. The Fiat brand saw its market share in Europe slide from 7 per cent to 5.3 per cent as demand for alternative fuel vehicles waned with the end of the cash-for-clunkers incentives.
The luxury market, however, roared back to life. Ferrari sales in its main market of North America rose 3 per cent to 452 vehicles, while in China they rose 3.7 per cent to 153 vehicles.
Trading profit for components was up 45 per cent to €61 million a year earlier, thanks to strong results in the Magneti Marelli and Fiat Powertrain units.