Fiat Chrysler Automobiles has set up an ambitious five-year growth strategy that should bring increased sales and a spectacular profit jump. But the recently merged automaker could find itself pressured as early as this year to meet its forecasted financial results.
That’s because FCA might find it hard to get to its full year profit guidance and could decrease the final level when it reports quarterly earnings this week. The situation is due to a slower North American sales recovery and its potential inability to compensate for the rising losses in Europe and Latin America.
Although the group is expected to increase operating profit (without special charges), by as much as 14% this year, the same can’t be said about the overall sales, with the numerous weak regions – such as Brazil or Europe.
According to a consensus of 15 analysts polled by Reuters, the FCA could report a 2014 operating profit averaging 3.29 billion euros ($4.16 billion) – below the company’s predicted 3.6 billion to 4.0 billion euros range.
The North American region, where FCA – thanks to its Chrysler subsidiary – now makes the bulk of its profit, has shown early signs of losing its strength, with the company only reaching 40% of its guidance when the second quarter finished. That’s because although sales grew, operating profit was down slightly – there was a greater mix of leases (with lower margins) and incentives have grown considerably.