Financial Outlook? Fiat Has No Clue
Fiat saved Chrysler. Now, Chrysler keeps Fiat alive. Fiat would be in deep trouble, would it not be for the huge profits generated at Chrysler. Fiat’s future is so cloudy that it can’t give guidance for the near future. Yesterday, Fiat reported a second quarter trading profit of 1 billion euros ($1.23 billion), “bolstered by soaring sales at its U.S. unit Chrysler,” says Reuters. Today, Fiat says it has no clue where it will stand by the end of the year.
Fiat says it can’t provide guidance “because of the international economic downturn and a slump in the European car market,” Reuters says. Fiat promised “information on products and plants” for when it will present third quarter results in October. Analysts get very grouchy when the company doesn’t tell them how the numbers will look a quarter or six months from now.
Without Chrysler, Fiat booked a 246 million euro ($302 million) loss for the second quarter. In Fiat’s home market Italy, overall car sales dropped 21.4 percent in July. Car registrations in Spain and France, where Fiat does considerable business, also caved.
Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.
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The more uncertainty, the more leverage Sergio has against the Italian unions.
Here is something that caught my attention today. According to Allpar.com; "Chrysler has cash, cash equivalents, and available credit lines amount to about $13 billion. Fiat is not hurting for money at the moment. Its holdings in cash and credit are higher than Chrysler’s: nearly $15 billion. Fiat is legally barred from using Chrysler cash for its own operations. When the deal was struck for Fiat to assume control of Chrysler in 2009, the U.S. and Canadian governments added a condition that sequestered the American automaker’s cash. When Sergio Marchionne put together the financing deal that allowed Fiat to repay its government loans, a similar condition was included in the package. Until the loans are repaid or renegotiated, “firewalls are up,” as Marchionne said during yesterday’s conference call with analysts. Unlike what happened in when Juergen Schrempp created the “merger of equals” and absorbed Chrysler Corporation’s multi-billion-dollar nest egg, Fiat is legally barred from using Chrysler cash for its own operations." http://www.allpar.com/news/index.php/2012/08/chrysler-cash-off-limits
And the good citizens of Italy, thank the American taxpayer for the Chrysler bailout and fire sale funded on the backs of the American taxpayer.
Wonder why Fiat is so dependent on the Italian home market? Fiats are cheap and cheerful in Italy. But Fiat has spent decades at the bottom of reliability and quality surveys in Europe. This never seems to change, so Germans, Swedes and Brits are skeptical about Fiats.