Fiat-Chrysler bearish on Europe

Fiat-Chrysler CEO says European market could perform worse than expected in 2013

Associated Press
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Fiat and Chrysler CEO Sergio Marchionne attends a Fiat shareholders' meeting in Turin, Italy, Tuesday, April, 9, 2013. Marchionne forecasts sales of between 4.3 million and 4.5 million cars in 2013, slightly higher than last year. Marchionne told shareholders Tuesday the company expects growth in the U.S., Latin America and Asia, while sales in Europe are forecast to decline for a sixth straight year. (AP Photo/ Marco Alpozzi, Lapresse) ITALY OUT

TURIN, Italy (AP) -- Italian carmaker Fiat, which controls Chrysler, will revise its earnings targets later this month as the European market is expected to decline for a sixth straight year, CEO Sergio Marchionne told shareholders Tuesday.

European economies are suffering as governments cut spending and raise taxes to lower debt. That has caused a big drop in spending, particularly on big-ticket items like cars.

Another drop in sales in Europe, however moderate, "would be a worse result than the forecast that we indicated in January as the basis for the 2013 targets," Marchionne said.

That forecast is for profits of between 1.2 billion euros and 1.5 billion euros ($1.5 million-$1.9 million) in 2013 on revenues between 88 billion euros and 92 billion euros. Marchionne said the group would update the forecasts by geographical region when they release first-quarter earnings later this month.

Fiat SpA, meanwhile, has been stalled in its efforts to complete the purchase of the remainder of Chrysler LLC shares it does not own, which are held by the autoworkers' union pension health trust. The two sides disagree over the price Fiat, which controls 55.8 percent of Chrysler, should pay for the rest.

Marchionne said he expects a deal in the second quarter, when a court in Delaware is due to rule on Fiat's petition to buy an initial 3.3 percent stake from the trust. The ruling would lay the ground for Fiat's takeover of the rest of the trust's stake.

He said Fiat has the cash to buy the outstanding stake, thanks in part to its decision not to pay a dividend this year to preserve its cash position. He also did not rule out selling assets to complete the merger.

"I have said clearly that there is no plan to raise capital to guarantee the merger with Chrysler," Marchionne said. "We have other possibilities, which include monetizing group assets."

He hopes it will become clear before the end of the year what action Fiat needs to take to finance and complete the merger.

Marchionne said he expects vehicle deliveries this year for Fiat and Chrysler combined to reach 4.3 million to 4.5 million — up from 4.2 million last year, which places the partnership as the world's 7th largest automaker.

The combined partnership expects growth in North America, Latin America and Asia, while sales in Europe are forecast to decline. Last year, Fiat and Chrysler sold 2 million vehicle sin North America, 1 million in Europe, 979,000 in Latin America and 115,000 in Asia.

North America is expected to account for half of 2013 sales, while Latin America and Europe should each contribute 1 million units. Deliveries in Asia, where volumes are much lower, are expected to double.

Marchionne confirmed that the group will break even in Europe by 2015-2016 thanks to plans to invest in Italian plants to build luxury cars for export. Fiat's Italian plants have been sorely underutilized, running at 44 percent of capacity last year, as the car company invoked short-term layoff schemes to reduce production and match lagging demand.

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