Fiat CEO Sees ‘Significant Opportunities’ for Auto Partnerships

(Bloomberg) --

Fiat Chrysler Automobiles NV's Chief Executive Officer Mike Manley said he sees “very significant opportunities” to partner with other automakers on autonomy and electrification projects in the next two to three years.

Fiat is seeking to fix a business that is losing money in Asia and Europe while sales in North America, which generates the lion's share of the company's profits, are slowing. Manley told analysts Friday on a conference call he's open to striking a deal with peers as European operations struggle with high labor costs at production sites in Italy and spending on electrification surges.

Manley, who succeeded Sergio Marchionne in July a few days before he died, is already expanding his collaboration on high-margin commercial vans in Europe with Peugeot-maker PSA Group. The CEO said he would “absolutely” consider using PSA's electric-vehicle architecture as the automaker works to meet tougher emissions rules in the region. The company is exploring a partnership with PSA to collaborate on a “super platform,” Bloomberg reported March 30.

Fiat will spend $2 billion over the next three years on regulatory emissions credits to ensure it's compliant as it rolls out a slew of new plug-in hybrid and battery electric vehicles, whose appeal to consumers is still uncertain.

“I believe the next two to three years are going to yield very significant opportunities” to partner with other automakers, Manley said on an earnings call Friday. “FCA will be playing an active, constructive role in how that future is defined.”

Read more on Fiat Chrysler's regulatory credit purchases

Fiat shares jumped 6.2 percent to $15.97 in New York, the biggest rally since January on an intraday basis, as investors shrugged off lower-than-expected first-quarter profit and focused on Manley's confirmation of 2019 earnings targets. The stock pared its losses in the past three months to 6.9 percent, versus a 3.9 percent average gain among industry peers.

Profit Falls

Adjusted earnings before interest and taxes fell 29 percent from a year ago to 1.07 billion euros ($1.2 billion) in the first quarter, missing analyst estimates ranging from 1.19 billion euros to 1.82 billion euros. Manley said a new Jeep pickup and heavy-duty Ram truck will boost sales and profit margins in the second half of the year.

“The results are slightly below my expectations but they're not a significant surprise,” Marco Opipari, an analyst with Fidentiis in Milan, said by phone. “The market is more focused on guidance at this point.”

Profit in North America fell as U.S. deliveries slipped three percent in the first quarter, with only the Ram brand posting volume growth, though higher prices are bolstering results. Manley warned in February that the first half of 2019 would be weaker than a year ago because the company is no longer benefiting from selling two versions of its Jeep Wrangler -- the latest generation and a now-retired predecessor model.

Fiat's business in Asia lost money for the fourth consecutive quarter as vehicle shipments fell 30 percent in China. The company announced a restructuring of Fiat's Chinese joint venture with Guangzhou Automobile Group Co. this week, consolidating sales operations and appointing new leadership to “more rapidly respond” to changes in the local market. Jeep brand sales have been a disappointment in China, which is experiencing its first auto sales slowdown in almost three decades.

Europe lost 19 million euros in the first quarter as volumes sank and the company continued to search for cost cuts as tougher emissions regulations force the automaker to spend more on electrification. Fiat is pooling its European fleet with Tesla Inc., a multi-year deal that will likely cost it hundreds of millions of dollars.

Manley's other turnaround project is the high-end Maserati brand, which saw global sales tumble 32 percent in the first quarter and adjusted profit plunge 87 percent to 11 million euros. He installed a new brand chief, Chief Technology Officer Harald Wester, in October to work on reducing bloated inventories. That process should drag on through the first half of 2019, Manley has said, and is also hampered by a lack of new products.

To contact the reporter on this story: Gabrielle Coppola in New York at gcoppola@bloomberg.net

To contact the editors responsible for this story: Craig Trudell at ctrudell1@bloomberg.net, Dan Liefgreen, Chester Dawson

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