Profit warning shows remodeled Fiat-Chrysler faces rocky road
By Agnieszka Flak and Bernie Woodall
MILAN/DETROIT (Reuters) - Fiat FIA.MI has cut its 2014 profit forecast after a slump in Latin American earnings, underscoring the task the carmaker faces as it completes a merger with U.S. arm Chrysler and shifts its focus away from Italy to create a true global player.
Turin-based Fiat, which this month bought out Chrysler's minority investor in a $4.35 billion deal, said on Wednesday the new Fiat Chrysler Automobiles (FCA) group would have its primary listing in New York, with a secondary listing in Milan.
The holding group will be registered in the Netherlands and have its tax domicile in Britain, cementing a politically sensitive shift away from Italy. Unions and politicians have been concerned about any potential job cuts, but Fiat said the merger would have no impact on jobs in Italy or elsewhere.
Five years after Fiat helped to rescue Chrysler from bankruptcy, the U.S. unit, the number 3 U.S. automaker, has become a major profit centre for the group, helping to offset a six-year European market slump.
Latin America has also become important. But Fiat said on Wednesday core earnings in the region plunged 80 percent in the final quarter of 2013, dragging group results below forecasts and contributing to its decision to lower expectations for this year.
"Fiat remains a fragile business, is highly leveraged ... and will not generate cash anytime soon. Management appear to face Sisyphean tasks in many regions," Max Warburton, an analyst at Bernstein, said in a note.
Fiat said it now expected a 2014 trading profit of 3.6 billion-4.0 billion euros, down from a range of 4.7 billion-5.2 billion euros given in October 2012 and below analysts' forecast of 4.15 billion.
The company said it would not pay a dividend on 2013 earnings to preserve cash after completing its acquisition of Chrysler to create the world's seventh-largest carmaker. Continued...