FCA Sees Sharp Slide in US Q3 Net Income | TheDetroitBureau.com- htxurl.info

FCA Sees Sharp Slide in US Q3 Net Income

Recalls take their toll on earnings.

by on Nov.05, 2015

FCA ordered a major recall in July when hackers were able to take control of a Jeep.

The U.S. has been the cash cow for Fiat Chrysler Automobiles since the trans-Atlantic was formed in 2009, but things took a severe turn for the worse in the latest quarter.

Net income at FCA’s U.S. operations plunged 89% during the July-September quarter, to $70 million compared with $611 million a year earlier. That was one key factor behind the overall $330.4 million loss Fiat Chrysler reported for the third quarter.

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Fiat Chrysler US reported a $1 billion one-time charge on Thursday, including a $159 million of the pretax charge covered damage to FCA vehicles during the devastating series of explosions that devastated the port in the city of Tianjin, China in August.

Another $848 million covers the cost of FCA’s big U.S. recalls. The maker was fined $105 million by the National Highway Traffic Safety Administration in July for serious lapses in its safety efforts. It agreed to take a number of steps to improve its recall and monitoring efforts, among other things agreeing to buy back up to 500,000 pickups and SUVs.

FCA US also agreed to speed up repairs on older Jeep models the government says are vulnerable to fires in rear-end collisions. To improve the recall response rate, FCA will offer owners a choice of incentives or the ability to trade in on newer models.

(FCA safety chief leaves as federal safety monitor signs on. For more, Click Here.)

CEO Sergio Marchionne with FCA safety chief Scott Kunselman before the latter's retirement.

Not all went wrong for FCA US during the third quarter, however. The American arm of the trans-Atlantic automaker posted a 5% increase in revenue, at $21.8 billion, much of its driven by growing global demand for its Jeep products. The SUV brand topped the 1 million sales mark for the first time in 2014 and has set a goal of reaching nearly 2 million before the end of the decade.

Overall, FCA US sold 737,000 vehicles during the third quarter, an increase of 4%.

Excluding the one-time charges, the subsidiary would have had a modified operating profit of $1.3 billion, a 34% year-over-year increase.

(Click Here for details about the approval of the UAW-FCA contract.)

FCA US’s parent, Fiat Chrysler Automobiles NV, last week reported a net loss of $339 million for the third quarter, even after a 17% increase in revenues, to $30 billion.

Those U.S. recall costs were a major factor in the net income downturn. Recent recalls have included one in July for 1.4 million Jeeps, Chryslers, Rams and Dodges for a software update after a controlled hack showed it is possible to take control of the vehicles remotely.

FCA, which is legally registered in the Netherlands, was the only one of the Detroit makers to post red ink for the latest quarter. But it was also the only one to go into the black on its U.S. operations, reporting a $25 million profit for the third quarter there.

(For a closer look at how FCA did globally, Click Here.)

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