April 12, 2019 / 10:35 AM / 6 months ago

Fiat Chrysler CEO sees acceleration as year goes on

AMSTERDAM (Reuters) - Fiat Chrysler gave an upbeat forecast for 2019 after a tricky end to last year and a slow start to this one, confirming the carmaker was on track to meet its targets and easing fears of a slowdown on the North American market.

The logo of Fiat carmaker is seen at the entrance of a showroom in Nice, France, April 8, 2019. REUTERS/Eric Gaillard

Speaking at a time when deal talk is bubbling again in the industry, Chairman John Elkann told investors the Italo-American group was ready to play a part in the “new and exciting” era for the auto industry.

He also struck a positive tone on the short-term outlook.

“Despite the (fact that the) second part of 2018 included trade difficulties in some areas that persisted in the first part of this year, we forecast a significative improvement in the second half of 2019,” Elkann said.

Chief Executive Michael Manley, who took up his post last July, said the group’s operating performance this year would exceed the record results posted in 2018.

In February weaker-than-expected guidance for 2019 profits and industrial free cash flow raised doubts about longer-term targets.

Manley has sought to persuade investors that the 2020 goals — set by late boss Sergio Marchionne — were still achievable.

“I am confident that we will successfully deliver on our guidance for this year,” he said.

He added that he expected a continued strong performance in North America, the carmaker’s main profit engine which accounts of almost 80 percent of core earnings, with higher margins compared to last year.

Weaker margins in North America in the last quarter of 2018 had raised concerns about a potential slowing demand in the United States, where FCA also faces stiff competition in the vital SUV and truck segments.

“BOLD AND CREATIVE”

Manley said industrial free cash flow this year was expected to be more than 1.5 billion euros (1.30 billion pounds), down on last year due to higher capital expenditure.

Manley also said he aimed to make dividends at FCA a regular feature after the group paid 0.65 euros a share to investors on 2018 results, its first dividend in 10 years.

At 1330 GMT Fiat Chrysler shares were up 2.4 percent, giving it a valuation of more than 21.5 billion euros.

Elkann - a scion of Italy’s Agnelli family that is Fiat Chrysler’s biggest shareholder - reiterated the family was prepared to take “bold and creative decisions” to help build a solid and attractive future.

Recent media reports have said France’s Renault could be eyeing a bid for Fiat while in March the president of Peugeot family holding company FFP said he would support a new deal and suggested Fiat Chrysler was among the options.

John Elkann, Chairman of the Fiat Chrysler Automobiles Group attends the presentation of the Science Gateway, a new facility dedicated to scientific education and outreach, by architet Renzo Piano at the CERN in Meyrin near Geneva, Switzerland, April 8, 2019. REUTERS/Denis Balibouse

After the sudden death of Marchionne last year, speculation about the future of Fiat Chrysler has intensified.

Marchionne, who had created the group by merging a troubled Fiat with Chrysler of the U.S., had advocated industry mergers to share the cost of building electric and self-driving cars.

Carmakers around the world are looking to tie-ups to cope with rising competition, the rise of electrification and the threat of a trade war between the United States and China.

Reporting by Giulio Piovaccari; writing by Stephen Jewkes; editing by Keith Weir

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