Fiat trims forecasts as European market slides

Italian carmaker Fiat shifts forecasts to low end as European market continues to weaken

Associated Press

ROME (AP) -- Fiat, the Italian carmaker that controls Chrysler, trimmed its 2012 forecasts on Tuesday under expectations that the European car market will remain weak into 2014.

Despite the darker outlook, the company based in the northern city of Turin returned to profit in the third quarter, as strong North American sales by Chrysler and good demand in Latin America and Asia offset the weak European market.

Net profit for the quarter ended Sept. 30 was €39 million, up from a loss of €46 million ($59.63 million) a year earlier. Revenues were rose 16 percent to €20 billion.

Net profit including assets not wholly owned by Fiat more than doubled to €286 million, from €112 million in the same period last year, beating expectations. Analysts polled by FactSet had expected the company to earn €178 million in net profit on €19.4 billion in revenues.

Fiat shares were trading down 2.56 percent at €4.01 in afternoon trading, after an earlier drop of 4 percent.

The company shifted its full-year forecasts toward the lower end of its earlier ranges, putting 2012 net profit in excess of €1.2 billion. It had previously given a range of €1.2 billion to €1.5 billion.

Fiat, which counts on the European market for a large share of its sales, said the view reflects its negative view toward the market.

"We see continuing weak trading conditions for the remainder of 2012, extending well into 2013 and at least part of 2014," Fiat said in a statement.

Later Tuesday, Fiat SpA CEO Sergio Marchionne is expected to outline the company's strategy for its Italian plants after putting the brakes on an earlier scheme to invest some €20 billion over five years.

The financial crisis has pushed Fiat sales to lows not seen in decades and has forced the company to periodically idle plants — sending workers home on reduced pay and hitting at the group's bottom line.

Marchionne, who discussed the carmaker's predicament with the government last month, is looking at refocusing its Italian plants on exports. He has been vocal about the need to close under-producing plants, and has pushed the EU to draw up a strategy to spread the pain among the continent's countries, where governments will often try to protect factories on their home turf. The EU, so far, has not responded.

Fiat's dilemma over how to manage its Italian plants comes just a week after Ford Europe announced it would close factories in Belgium and Britain that — including white collar layoffs — will put some 6,200 workers in Europe out of a job and take out 18 percent of its European capacity.

The French government has offered €7 billion in aid to PSA Peugeot, the No. 2 carmaker in Europe, in an attempt to stave off 9,500 layoffs.

Fiat sales were down 20 percent in the first nine months of the year, to 1 million vehicles from 1.37 million a year earlier. In September alone, they dropped 25.7 percent. That's in a European auto market that dropped 7 percent in the first three quarters of the year, according to ACEA, the European automakers association.

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