Analysts doubt Fiat Chrysler could achieve its goals by 2018

Article by Andrew Christian, on June 14, 2014

Fiat Chrysler chief executive Sergio Marchionne is aiming to more than double the carmaker’s vehicle sales and operating profit by 2018. Financial analysts, however, have misgivings on whether the carmaker has sufficient cash available to finance expansive sales growth at eight of its brands in the next five years.

The analysts believe that Marchionne will have to trim FCA’s portfolio for the business plan to work. Philippe Houchois, an auto analyst at UBS, told Automotive News Europe that if only Fiat was not the No. 1 brand in Brazil, Marchionne would already have terminated the Fiat brand.

Arndt Ellinghorst of consultancy International Strategy & Investment in London said that FCA should work on either Dodge or Chrysler, but not on both Dodge and Chrysler.

Marchionne unveiled FCA’s five-year business plan in May, setting key targets to be achieved in 2018, like increasing sales 60 percent to 7 million units and hiking revenue from EUR93 billion expected this year to around EUR132 billion. The targets also include increasing operating profit from EUR3.6 billion-EUR4.0 billion set for this year to EUR8.7 billion-EUR9.8 billion in 2018.

Analysts see FCA failing to achieve those three goals, particularly because the carmaker will have a net debt of more than EUR10 billion until at least the end of 2016. FCA should also cover costs associated with EUR55 billion of self-financed investments during the plan period.

Marchionne is planning to achieve those goals by more than doubling Jeep’s global sales to 1.9 million and by increasing its volume sales in China fivefold, as well as by reviving and transforming Alfa Romeo into a coveted global premium brand.

“PowerPoint presentations are a lot easier than real life,” Harald Hendrikse, an analyst with Nomura Holdings, told Automotive News Europe that FCA’s brands need a huge amount of work to be where they should be.

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