Fiat Chrysler Jumps After Soaring Ram Sales Boost North America

(Bloomberg) -- Fiat Chrysler Automobiles NV continues to mint money on robust demand for its Ram pickups, giving its chief executive officer breathing room to fix struggling overseas operations and potentially attract a suitor for a merger.

Higher profit in North America is offsetting weak performance in Europe and Asia and keeping Fiat Chrysler's overall profit steady as several of its major peers falter. Following a quarter in which talks to combine with Renault SA fell part, the Italian-American automaker emerged with its full-year guidance still intact, sending shares higher.

Almost all of Fiat Chrysler's earnings came from North America, where profit rose 12% to 1.57 billion euros ($1.75 billion), with strong demand for its new Jeep Gladiator pickup and Ram truck models countering lower overall shipments. Profit margins for the region rose to 8.9% from 8.0% a year ago even as the automaker offered hefty discounts to gain share in the lucrative U.S. truck market.

The bullish results in North America come as Chief Executive Officer Mike Manley struggles to rebuild problematic operations in Asia and Europe inherited from his predecessor, the late Sergio Marchionne. Manley indicated he's still amenable to a merger despite a failed deal with Renault as he works to keep Fiat Chrysler competitive amid an industry-wide push into electrified and driverless cars.

“We have a relatively robust business plan that survives with or without that type of merger,” Manley said on an earnings call. “But we certainly continue to say we are open to opportunities.”

Read more on Manley's tenure

Fiat Chrysler rose 2.8% to $13.34 at 12:02 p.m. in New York.

Two-Pronged Truck Strategy

While Fiat Chrysler managed to shrink operating losses in Asia despite cratering demand in China, the world's biggest car market, profits in Europe slumped 88% to just 22 million euros. Losses also deepened for the troubled Maserati luxury car brand, which won't return to profitability before 2020, executives said.

Manley said the company expects to attain 10% profit margins in North America in the second half of the year, thanks to healthy demand for its Rams and the Jeep Gladiator. He also indicated the carmaker will continue its two-pronged strategy of selling an older model called the Ram Classic alongside redesigned Ram models for the foreseeable future. That has enabled Fiat Chrysler to overtake the Chevy Silverado made by rival General Motors Co. as the No. 2 pickup in the U.S.

Earnings in North America were also aided by President Donald Trump's rollback of penalties on vehicles that failed to meet fuel efficiency standards, which netted an extra 150 million euros in canceled provisions, the company said.

Fiat Chrysler must spend billions of dollars to catch up with peers on next-generation technologies such as electric and self-driving vehicles, one of the key drivers of its attempt to join forces with Renault. Manley reiterated his company will be compliant with tightening emissions regulations in Europe next year. That is due to a regulatory credit deal with Tesla Inc. and upcoming plug-in hybrid versions of the Jeep Compass and Renegade, an all-new battery-electric Fiat 500, and more efficient combustion engines, he said.

The Italian-American automaker posted second quarter adjusted Ebit of 1.53 billion euros, unchanged from a year ago and in line with analyst expectations. It kept its full year forecast, helping lift the company's shares as much as 5% in New York trading -- the biggest jump in two months. That sets Fiat Chrysler apart from Daimler AG and Nissan Motor Co., which both cut their outlooks.

To contact the reporters on this story: Gabrielle Coppola in New York at gcoppola@bloomberg.net;Daniele Lepido in Milan at dlepido1@bloomberg.net

To contact the editors responsible for this story: Chester Dawson at cdawson54@bloomberg.net, Elisabeth Behrmann, Craig Trudell

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