Fiat Chrysler’s Q3 Profits Dinged Due to Diesel Emission Charges

Record earnings before diesel issue may mean dividend payment.

by on Oct.30, 2018

Fiat Chrysler's third quarter earnings were hurt by charges tied to possible diesel emissions violations.

Fiat Chrysler Automobiles net income dropped 38% during the third quarter despite record adjusted earnings before interest and taxes of 2 billion euros, or $2.27 billion, opening the door for the company to pay its first dividend since it was re-organized in 2014.

However, net profit decline 38% to 600 million euros, or $681.16 million, including a 700 million charge related to U.S. diesel emissions matters. FCA is now under investigation by U.S. Department of Justice for the company’s failure to disclose software on about 104,000 diesel-powered pickups and SUVs that regulators said could be similar to the “defeat devices” Volkswagen AG used to cheat emissions-testing on millions of its diesel-powered vehicles.

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FCA’s worldwide shipments increased by 3% and net revenue grew by 9% to 28.8 billion euros during the quarter. Despite cost of the diesel penalties, FCA’s adjusted EBIT in the North America region grew by 51% with margin at 10.2%, according to the financial information released by the company.

U.S. market share grew to 12.9%, up year-over-year, with retail share at 12.7%, up 1.5 points. The increase in shipments mainly due to all-new Ram 1500 and Jeep Wrangler, as well as the new Jeep Cherokee, FCA officials said.

(FCA may reassess plant to move Ram pickup out of Mexico. Click Here for the story.)

Higher net revenues were primarily due to positive effects from volumes and net pricing. The company’s adjusted EBIT increase was due to higher volumes, positive mix and net pricing, partially offset by increased product content and logistics costs, the company said.

Moody’s has raised FCA’s outlook to positive from stable and affirmed its Corporate Family Rating at “Ba.”

Meanwhile, the automaker has reached agreement to sell Magneti Marelli for 6.2 billion euros to Calsonic Kansei Holdings Co. Ltd, which will operate under the name Magneti Marelli CK Holdings.

FCA’s sales in China dropped and the company blamed the decline on the overall weakness of sales in the Chinese market, which has slowed during the summer.

(Click Here for more about FCA selling Magneti Marelli for $7.1 billion.)

The company’s European market share for passenger cars increased slightly to 6.3% and light commercial vehicles were down to 10.6%. Shipments slightly down, with higher Jeep shipments more than offset by lower Fiat volumes, the company said.

FCA, however, remained the market leader in Brazil, with market share of 18.2% and Argentina at 12.7%. Shipments increased, with 15% increase in Brazil partially offset by impact of Argentina economic downturn.

FCA’s industrial debt of 200 million euros, after acceleration of 600 million euros in discretionary pension contribution, net of tax.

(To see more about Fiat Chrysler outselling Ford in September, Click Here.)

The pension transaction clears the way for payment of an extraordinary dividend of 2 billion euros at closing, which is in addition to the commencement of an annual ordinary dividend in Spring 2019 of 20% of earnings as presented at 2018 Capital Markets Day. Both payments are subject to Board of Directors and shareholder approval, FCA said in its financial statement.

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