July 30, 2014 at 10:57 pm

Fiat's profits down prior to merger

Marchionne (Robin Buckson / The Detroit News)

Fiat SpA, whose shareholders vote in two days on merging the Italian carmaker with U.S. unit Chrysler Group LLC, reported profit that missed estimates as sales fell in Brazil and spending rose in the U.S. and Canada.

Second-quarter earnings before interest and taxes fell 10 percent from a year earlier to 961 million euros ($1.29 billion), Turin-based Fiat said Wednesday in a statement in which it reiterated its full-year forecast. Profit was less than the 1.01 billion-euro average of five analyst estimates compiled by Bloomberg.

The planned combination with Auburn Hill-based Chrysler is part of Fiat CEO Sergio Marchionne’s plan to create a carmaker able to compete with global leaders such as General Motors Co. The project focuses on rolling out higher-priced Alfa Romeo sedans, Maserati sports cars and Jeep sport utility vehicles.

“We’re dead serious on getting this done,” he said of the merger to media members and investors on a conference call.

Fiat’s growth has been hampered by an economic slowdown in Brazil, while the cost of vehicle discounts hurt profit in the North American Free Trade Agreement market.

Latin American vehicle sales fell 21 percent, with the decline in Brazil matching the regional drop, while revenue slid 23 percent and profit plunged 72 percent. North American Ebit fell 18 percent because of currency effects, spending on incentives to sell older models, advertising costs to promote new vehicle, Fiat said. In contrast, revenue in the region gained 6.6 percent.

Marchionne focused on the fact that Fiat has an “operational advantage in Latin America” and posted better results than other automakers. “We have done tremendously better than anyone else in the region,” he said.

Ford Motor Co. and General Motors Co. last week both posted second-quarter losses in South America. Ford lost $259 million there in the second quarter, while GM posted a pre-tax loss of $81 million.

Fiat stock closed down 1.6 percent at 7.45 euros ($10) in Milan. That pared the stock’s gain this year to 26 percent, valuing the carmaker at $12.5 billion.

Net income jumped 23 percent to $234 million, missing analysts’ average estimate of $419 million. Revenue increased 4.7 percent to $31.2 billion.

Fiat’s luxury division, which includes the Maserati and Ferrari brands, posted a 58 percent jump in earnings while deliveries almost tripled.

The company stuck to a goal of increasing Ebit excluding one-time items to a range $4.8 billion to $5.4 billion in 2014 from $4.5 billion last year.

Staff Writer Michael Martinez contributed.