Bold Targets Look Realistic, Big Profits Too.
Meanwhile, Fiat’s Latin-American Mainstay Crumbles.
Arguments rage about the efficacy of Fiat Chrysler Automobile’s (FCA) long-term plan for survival, but the Maserati subsidiary’s serious sales acceleration looks set to make some serious money.
CEO Harald Wester confirmed to Automotive News Europe that Maserati was on track to hit the sales targets of 50,000 vehicles for 2015 and 75,000 in 2018. Sales totalled only 15,400 in 2013. The targets will include the current models – the Gran Turismo, Quattroporte and Ghibli, and later the new Levante SUV and Alfieri two seater coupe and cabriolet.
Macquarie Research analyst Jens Schattner is not a cheerleader for Fiat Chrysler, but is impressed by Maserati.
“Maserati will become a major earnings contributor over the period 2013-16 and as such represents an important source of additional earnings to partially offset the incredibly fast deterioration of Fiat’s profitability in Latin America,” Schnattner said.
Schattner said Maserati delivered 8,041 cars in 2014’s first quarter compared with 1,304 in the same period of 2013.
“Maserati seems to be well on the way to deliver on its ambitious medium-term targets,” Schattner said.
Schattner said this means revenues will boom to more than €6 billion by 2018, up from €1.7 billion in 2013, with an EBIT (earnings before interest and tax) of well above 2013’s 10.3 per cent. He expects trading profit of €420 million this year – a 12.5 per cent margin, rising to €732 million in 2016 (14.0 per cent).
Latin America dives
Meanwhile operating profit for Fiat in Latin America will dive to €168 million this year (2.0 per cent), revive a bit to €218 million in 2016 (2.5 per cent) compared with 2012’s €1.1 billion (9.5 per cent) and €619 million (6.2 per cent) million in 2013, Schattner said.
International Strategy and Investment, commenting after news that Fiat Chrysler planned to raise as much as €4 billion by issuing new bonds by the end of 2015 and sell shares to U.S. investors where the company will be listed, said Fiat Chrysler is the most indebted car manufacturer.
ISI estimates FCA gross debt at more than €30 billion and pointed out that a reduction in this cost would add greatly to profit margins. ISI estimated that with average financing costs of 6.8 per cent last year, this cost the company about €1.9 billion.
Margin pressure
Macquarie’s Schattner said Fiat has lagged behind its competitors in Europe with R&D spending, using only 3.6 per cent of revenues over the last eight years compared with a sector average of 5.1 per cent. Fiat will have to spend more on R&D to catch up, while amortization levels will increase substantially too.
“Both trends will likely put meaningful pressure on Fiat Chrysler Automobiles’ margins until 2018,” Schnatter said. He also cut his forecast for FCA trading profit this year to just above the bottom end of the company’s guidance of €3.6 billion to €4.0 billion.
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