FCA’s growth plans clouded by Latin American outlook image

The recently merged Fiat Chrysler Automobiles is aiming to increase sales in the Latin American region by 44% over the next five years – part of a very ambitious strategy to raise profit fivefold and jump global sales by 60%.

The only problem (in this singular case, as analysts and industry observers have seen numerous other loopholes) for the Italo-American car producer is that a massive drop in auto sales has recently hit Brazil, the region’s biggest economy, and the short-term forecasts are increasingly negative.

And, because just two years ago the Latin America was the provider of almost a third of the annual global profit, the impact on sales here could reverberate across the worldwide strategy. That’s a serious turn of events after the region was helping Fiat SpA to cope with the effects of the European slump in demand.

Now, Latin America’s contribution to the overall profit of the company has slid to 17% in 2013 and then to just 1% during the first six months of the year – mainly because of shrinking tax incentives in Brazil, higher costs across the region, currency headwinds and dwindling local economies.

IHS Automotive predicts in its latest regional forecast the sales would only amount to 5.7 million vehicles by 2018, a drop of 3.3% on the figures accounted last year, and the markets would not pick up pace before 2017.

Via Reuters