(Reuters) - Chrysler Group LLC, the U.S. automaker majority owned by Italy's Fiat FIA.MI, said its 2013 profit would come in toward the low end of its initial business plan, and it cut its 2014 free cash flow forecast by two-thirds.
The No. 3 U.S. automaker, which also reported higher fourth-quarter earnings on Wednesday, now expects free cash flow of $1 billion in 2014. In 2009, Chief Executive Officer Sergio Marchionne had forecast $3 billion as part of his five-year business plan designed to help Chrysler regain its footing after its government-funded bankruptcy nearly four years ago.
Chrysler added that it expected free cash flow to shrink this year to about $1 billion or higher from $2.2 billion in 2012 as the automaker anticipates higher capital spending and slower growth.
But Marchionne, who had led both Fiat and Chrysler since 2009, was quick to add during a conference call with reporters and analysts that he expected the company's cash flow this year to be "well above" the $1 billion mark.
Chrysler's modified operating profit forecast of $3.8 billion in 2013 is nearly one-third higher than 2012 levels. Initially, Marchionne forecast a 2013 profit of between $3.8 billion and $4.4 billion.
Chrysler expects profit margins to rise to 5 percent from 4.4 percent last year. Revenue is expected to increase at least 9 percent to between $72 billion and $75 billion.
Since 2009, Chrysler has overhauled its lineup and emerged as the chief source of strength for Fiat as economic weakness in Europe hurts its sales. But Chrysler has also made its own missteps, as with the shaky introduction of its Dodge Dart compact car last year.
Fiat now owns 58.5 percent of Chrysler. The rest of Chrysler is owned by a retiree healthcare trust affiliated with the United Auto Workers union.
"While we are pleased to have achieved strong financial results in 2012, the enterprise we are crafting is not complete," Marchionne said in a statement.
Chrysler added that it planned to have 16 Fiat and Alfa Romeo models in its North American lineup by 2016.
For the fourth quarter, Chrysler reported a 68 percent rise in net income to $378 million from $225 million a year earlier, driven by higher vehicle sales in North America.
The Auburn Hills, Michigan-based company said its net income would rise to about $2.2 billion in 2013 from $1.67 billion in 2012.
(This story was fixed to correct in third paragraph to say "2.2 billion in 2012" from "2.2 billion in 2013")
Reporting by Bernie Woodall in Detroit; Editing by Lisa Von Ahn