Carmaker Fiat likely to miss debt target

Tue Jan 29, 2013 8:09pm EST
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MILAN (Reuters) - Italian carmaker Fiat-Chrysler FIA.MI is likely to miss its debt target when it reports 2012 earnings on Wednesday, making it harder to pay for an ambitious expansion and boost its stake in U.S. affiliate Chrysler.

As Fiat's management moves to increase spending, analysts are keeping a close watch on the debt for signs that its money-losing European operations are straining the group's finances.

Fiat's share price has outperformed rivals like Volkswagen (VOWG_p.DE: Quote) and Peugeot (PEUP.PA: Quote) in the past 30 days, driven partly by hopes that Fiat will buy more Chrysler shares beyond its 58.5 percent stake or engineer a full-scale merger.

"We do not believe Fiat will reach its net industrial debt guidance due to overproduction in Europe in the fourth quarter," Commerzbank wrote in a preview note. "We are concerned by the high net debt pile which limits Fiat's options with regard (to) Chrysler and future investments."

Commerzbank has a "hold" rating on Fiat stock.

Fiat's year-end net industrial debt is seen at 6.61 billion euros, according to the median figure in a poll of 23 analysts published by the Turin-based automaker on its website. Their estimates ranged from 6.55 billion to 6.81 billion euros.

The company has been targeting net debt of 6.5 billion euros ($8.7 billion).

For the fourth quarter, the analysts are forecasting a trading profit of 1 billion euros, which includes 780 million euros from Chrysler.

Fiat sees a full-year loss of 700 million euros in Europe, where car sales are entering their sixth year of decline. It does not expect to break even in Europe before 2015.   Continued...

Fiat-Chrysler chief executive Sergio Marchionne makes his speech during the visit of Italy's Prime Minister Mario Monti at the Fiat car factory in the southern city of Melfi December 20, 2012. REUTERS/Ciro De Luca