Fiat Expects Profit to Increase as Spending Cuts Will Lower European Losses image

Fiat has reduced its profit target for Chrysler, as the Italian automaker will focus on cutting costs in Europe to reach full-year goals.

Chrysler’s operating profit for this year might not reach a previous forecast by as much as 13% as the automaker will invest money on rolling out new products, such as the Jeep Cherokee. Fiat stuck to the group’s profit target for 2013 after costs cuts reduced losses in the European market.

“Chrysler, which used to be the strength of the group and Fiat’s main competitive advantage versus its European competitors, is carrying the negative news,” said Vincenzo Longo, market strategist at IG Group in Milan.

Fiat and Chrysler CEO Sergio Marchionne has postponed investments in new models in Europe, where auto industry is expected to drop for the sixth consecutive year. During the first six months Fiat’s sales in the region fell 10%, compared with an industrywide drop of 6.7%.

“The timing of product launches and capacity increases causes this year’s performance to be biased to the second half,” Marchionne said in Chrysler’s statement. “A continued aggressive drive for excellence and flawless execution will be essential to attain the targets we’ve set for ourselves.”

Fiat kept its forecast of reaching a trading profit this year of between 4 billion euro and 4.5 billion euro, an increase of 3.81 billion euro from last year. Analysts predict the automaker will report a trading profit of 3.83 million euro in 2013.

Source: Bloomberg