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Fiat Cuts Targets as Sales in Europe Languish

October 31, 2012- Performance targets were sharply cut by Fiat for the next 24 months. The automaker said languishing sales across Europe, which has been hit by austerity measures, could cut off up to a third of the company’s projections for trading profit in 2014.

The steep downturn across Europe forced Sergio Marchionne the Fiat CEO to focus on bolstering European operations instead of increasing the amount of shares in Chrysler Groups, the automaker in the U.S. that Fiat owns a 58.5% stake.

The CEO, who is in charge of both Chrysler and Fiat, repeated he still has plans to merge together the two automakers before 2015, but indicated that Europe was more important at this time.

Marchionne said the company’s primary objective at this time was to fix the environment in Europe. The automaker in Italy now expects the trading profit for 2014 will be between $6.1 billion and $6.8 billion, which is down from the forecast earlier of $9.75 billion.

The company, based in Turin, expects it will sell between 4.6 million and 4.8 million vehicles during 2014. That is down from the forecasted 6 million in the company’s five-year plan that was outlined back in 2010. That was at a time when it looked as though Europe was ready to recover from the financial crisis.

On Tuesday, Fiat reported just higher than expected profits for the third quarter. The automaker said it was not planning to shut any factories in Europe, unlike its competitors.

Rather, it promised to increase its investment to return the operation in Europe to profitability by 2015-2016 through the development of global brands Maserati, Jeep, Fiat and Alfa Romeo.

Marchionne also admitted there was a risk to investing and not closing factories, while the market in Europe was getting smaller. He said the current situation was not for the faint at heart. Marchionne said the company never once shied away from any challenges that presented themselves in making Chrysler a viable carmaker.

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