MILAN (Reuters) - Fiat Chrysler Automobiles (FCA) is turning the corner in Europe and may break even in the region at an operating level ahead of schedule as a focus on premium vehicles for export is starting to pay off.
Along with other mass market producers, FCA was hit by a six-year slump in car sales in Europe, from which the region is only slowly recovering. It has forced FCA to increasingly rely on its U.S. operations for profit.
“In 2015, we could break even at the operating level (in Europe),” CEO Sergio Marchionne said at the Detroit Auto Show in comments later confirmed by a spokesman. FCA had forecast its European operations - which in 2013 posted an operating loss of 520 million euros ($613 million) - arresting losses in 2016.
In another sign of a turning point in its home market, FCA said on Monday it planned to add more than 1,000 new workers at its Melfi plant in southern Italy thanks to “extremely positive” sales of its new Jeep Renegade and Fiat 500X models - allowing it to utilize fully the plant’s production capacity.
It also ended temporary layoffs at the plant, in which FCA has invested more than 1 billion euros, allowing 5,418 employees to return to work full-time.
“Even though a swallow does not make a summer and the problems of the car sector in Italy are still huge, we are seeing a first turnaround after 10 years of production and staff losses,” said Cesare Damiano, chairman of the parliament’s labor committee.
To help counter weak demand in its traditional markets, especially Italy, Marchionne decided in 2012 to follow bigger rivals and strengthen its position in the fast-growing and higher-margin market for premium cars.
He is investing to produce luxury Maseratis and sporty Alfa Romeos at idled plants in Italy to create jobs and re-hire suspended workers. FCA employs around 62,000 people in Italy but thousands have been in state-backed temporary lay-off schemes for years.
Recovery in Europe is part of a bigger goal to invest 48 billion euros ($56.73 billion) over five years to 2018 to boost FCA’s global sales by 60 percent to 7 million cars and increase net profit fivefold.
Marchionne has promised to fill all of FCA’s seven car assembly plants in Italy and bring back all workers from the layoff schemes by the time the five-year investment plan is completed. However, analysts have called some of Marchionne’s targets too ambitious.
Reporting by Agnieszka Flak, editing by David Evans