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Fiat Faces Uphill Struggle In Europe This Year

Ageing Model Line-up Will Force Discounts In 2011
Things May Look Up Towards The End Of The Year, Thanks To Chrysler

Fiat reported improved financial results for 2010, its last before splitting into separate and independent Industrial and Auto companies, and the car business faces an uphill struggle in Europe this year, according to investors.

Commerzbank said Fiat Auto faces a tough time in Europe in 2010 with prices under pressure and sales difficult because of Fiat’s lack of new models.

“Volume growth and pricing will remain taxing in Europe in 2011. In addition, growth will slow in Brazil, which should limit incremental earnings from the region. We see tailwinds from new models only from 2012 onwards,” said Commerzbank analyst Sascha Gommel.

“We expect the European operations to report another year of substantial losses despite the fact that light commercial vehicles should develop positively. Fiat has the oldest fleet in the market,” Gommel said.

Citigroup Global Markets analyst John Lawson said Fiat’s forecasts for 2011 didn’t differ from investors much, so that didn’t generate any enthusiasm. But he did manage to see some brighter horizons towards the end of 2011.

“A recovery in core Fiat volume car operations is probably close, as the model cycle turns more favourable in the second half of 2011, and early Chrysler effects kick in,” Lawson said.

Ferrari’s big contribution
Deutsche Bank analyst Gaetan Toulemonde pointed out that Ferrari contributed 43 per cent of total automotive profit in the fourth quarter.

Combined Industrial and Auto trading profit in the fourth quarter rose 26 per cent to €615 million, compared with the same period of 2009. Net income reached €318 million versus a loss of €283 million a year earlier.

Fiat announced that it had raised its stake in Chrysler to 25 per cent from 20 per cent at the Detroit show. To raise this to 30 per cent, Chrysler must sell vehicles worth $1.5 billion outside of North America. The final five per cent will be triggered when Chrysler delivers a car on a Fiat platform capable of 40 mpg. Fiat-Chrysler CEO Sergio Marchionne has said this can be achieved in 2011. Fiat could even raise its stake to over 51 per cent this year, if Chrysler goes public and repays its government debt.

Neil Winton – January 31, 2011

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