3rd UPDATE: Fiat Posts 2Q Loss, Still Expects Auto Spinoff
22 Juli 2009 - 8:22PM
Dow Jones News
Fiat SpA (F.MI) Wednesday reported a wider-than-expected
second-quarter net loss due to weaker sales and its chief executive
said he was still keen on spinning off the Italian group's core car
business.
Sergio Marchionne said a spinoff was inevitable, but he first
wanted to be sure that the auto unit would be able to fend for
itself in a competitive industry going through its worst crisis in
decades.
"The timing is unclear," he told reporters. "It may take two
years, it may take three years to get it done, but I think there
will be a point in time in which Fiat will be of sufficient size
and muscle to be independent."
Marchionne's plan to spin off the business came after he offered
to take over Adam Opel GmbH last month. But he put it on hold after
letting his offer for the German car maker expire when other
contenders appeared.
Marchionne said he was open to talks with Germany and General
Motors Co., Opel's parent, but on his terms, adding that Opel was
not crucial for Fiat's survival. "We aren't threatened by anyone in
the marketplace."
Germany and GM have yet to choose one of three other bids for
Opel.
Like other car makers, Fiat has cut costs and tried to work down
its debt in the face of a sharp drop in sales. It has also sought
to gain scale by entering into a partnership with Chrysler Group
LLC. Opel had been the next on the list.
Government incentives to buy small, less polluting cars worked
in Fiat's favor. In the first half of the year, it had the smallest
unit sales drop among Europe's largest car makers, down 1.1%,
allowing it to surpass French rival Renault SA (RNO.FR) as the
region's fifth-biggest car maker with a 9.1% market share.
Worldwide, Fiat sold 591,000 cars and light trucks in the
quarter, down 8.3%.
Although these incentives have provided some relief to
manufacturers in Europe this year, analysts expect 2010 to be a
difficult year when many of those incentives expire.
But Marchionne said that Fiat's car business, which includes the
Lancia and Alfa Romeo brands, would still make a profit.
Fiat's Iveco truck and CNH Global NV (CNH) construction
divisions were more problematic because their businesses were seen
staying depressed for most of 2009 with signs of recovery becoming
visible only in the fourth quarter.
CNH, a U.S. subsidiary that also makes farming equipment,
suffered a 21% drop in revenue, and revised downward its unit sales
forecast for the year to a 25% to 30% drop from a range of 15% to
25%.
However, Fiat confirmed its 2009 targets, including a net profit
of more than EUR100 million and a net industrial debt of less than
EUR5 billion.
The debt level fell to EUR5.7 billion at the end of the quarter
from EUR6.6 billion at the end of the first quarter. Cash rose to
EUR6.4 billion, up EUR1.3 billion from the first quarter.
For the quarter, Fiat posted a net loss of EUR179 million
compared with a net profit of EUR646 million in the same period a
year ago. The loss was bigger than the median of forecasts of
EUR110 million compiled from a survey of analysts by Fiat. Revenue
fell 23% to EUR13.2 billion.
Fiat's shares ended down 1.7% at EUR7.80. Although results were
in line if not better than expectations, analysts pointed to CNH's
sales forecast downgrade as one reason for investors to lock in
profits after the stock outperformed its peers by gaining 68% in
value this year.
Company Web site: www.fiatgroup.com
-Gilles Castonguay, Dow Jones Newswires; +39 02 5821-9908;
gilles.castonguay@dowjones.com