Amid the slump in Brazil sales and continuing losses in Europe, Fiat Group has decided to lower its profit target for 2013. In a statement, Fiat said that its full-year trading profit, or earnings before interest, taxes and one-time gains or costs, will fail to meet its previous forecast by up to 13%.
Andrea Sianesi, the associate dean at the Milan Polytechnic's business school, said that third-quarter earnings on that basis declined by 9% to 816 million euros ($1.12 billion). He also talked about how fortunate it is that Fiat owns Chrysler. While Fiat used to depend on Brazil, it now has to depend on North America as Brazil is slowing down.
For the last four years, CEO Sergio Marchionne has been working to merge Fiat and Chrysler Group to form a global player with the scale to rival Toyota Motor Corp., General Motors Co. and Volkswagen Group.
In addition, this strategy is meant to make Fiat lessen its dependence on its mass-market businesses in Europe, where its deliveries fell 3% in September, and Brazil, where it reported a drop of 11% last month. Fiat predicted a full-year trading profit, ranging from 3.5 billion euros to 3.8 billion euros. This is below the company's previous range of 4 billion euros to 4.5 billion euros.
The profit for the third quarter didn’t meet the 903 million euro average estimate of five analysts that Bloomberg News surveyed. Its sales increased by 1% to 20.7 billion euros. Its profit in Latin America plunged 52% to 165 million euros. On the other hand, it still reported losses in Europe. However, the losses narrowed from 238 million euros to 165 million euros.