Fiat posts euro25 million Q1 loss, says auto business will be hurt by end of cash for clunkers

Fiat posts euro25 million Q1 loss

TURIN, Italy — Italian automaker Fiat SpA, which controls U.S.-based Chrysler LCC, reported a first-quarter loss of euro25 million ($34 million) and forecast its auto business will be hurt this year by the elimination of cash-for-clunker programs in Europe.

The results released Wednesday improved on last year’s first-quarter loss of euro410 million as revenues rose, with the auto business taking residual benefits of the slowing cash-for-clunkers programs.

First quarter revenues were up 14.7 percent to euro12.9 billion, compared with euro11.2 billion a year earlier.

Fiat Group Automobiles posted a 22 percent increase year-on-year with revenues of euro6.8 billion on deliveries of 532,400 cars and light vehicles, benefiting from the last gasps of incentive schemes in some European countries, which are being eliminated and phased out this year. Fiat also saw positive results at its agriculture equipment unit thanks to cost cutting, and trucks unit on sector recovery.

“The automotive business continues to be the biggest source of revenue for this group,” CEO Sergio Marchionne told analysts, saying that it contributed more than half of Fiat’s group trading profit and benefited from a more favorable sales mix than a year earlier.

Group trading profit — or operating profit less extraordinary items — was euro342 million, compared with a first quarter trading loss of euro48 million.

Chrysler Group LLC, where Fiat has a 20 percent stake, lost a staggering $3.8 billion from the time it left bankruptcy protection June 10 through the end of last year. But the automaker cut its net loss to $197 million from January through March and improved its cash reserves.

The Auburn Hills, Michigan, automaker said first-quarter revenue was $9.7 billion, up 3 percent from the fourth quarter.

Trading profit more than doubled at Fiat’s CNH agricultural equipment unit, to euro127 million from euro49 million — on cost cutting that offset lower sales in Europe and North America. CNH revenues were flat. Fiat’s Iveco truck business posted an 11.2 percent increase in revenues to euro1.7 billion, reflecting early signs of recovery.

The picture was more mixed in automobile sales as incentive schemes wound down. In Italy, for example, Fiat posted revenues in the first quarter on cars ordered in December under the incentive schemes, which were not extended.

The cancellation of incentives in Germany saw Fiat’s volumes plunge there by 73 percent — which is reflective of Fiat’s concerns for 2010.

Fiat said the programs’ elimination this year will hurt its automobile business — the core driver of its earnings — with deliveries expected to drop 15 percent this year. But Marchionne said the auto business “will still make a positive contribution nonetheless.” He forecast break-even net profit with 2009, and a trading profit of euro1.1 billion to euro1.2 billion.

Fiat said it would continue to implement “rigorous” cost containment.

Fiat shares slid 3.36 percent to euro10.07 in afternoon trading, following gains on Tuesday after the announcement that Agnelli heir John Elkann would become chairman.

Fiat released its January-March earnings ahead of a presentation outlining its five-year business plan, including new model launches and tighter integration with Chrysler. Fiat took an initial 20-percent stake in the bankrupt automaker last June.

Earlier Wednesday, the board confirmed the 34-year-old Elkann, heir to the Agnelli industrial dynasty and Fiat’s major shareholders, as the group’s chairman, replacing Luca Cordero di Montezemolo.

“Notwithstanding his young age, he has now reached the right level of seasoning and maturity to assume the role,” CEO Sergio Marchionne said, noting that Elkann “and I have navigated … through some pretty shark-invested waters,” in the last six years.