Fiat CEO sees higher 2010 profit in changed industry

Posted on Thursday, October 22nd, 2009 at 2:53 PM EDT.

Carmaker Fiat SpA said it expected to boost trading profit 50 percent to 1.5 billion euros in 2010 from this year’s target if Italy continued subsidies to buy cars, but still planned to stick to its tough cost control, Reuters reported.

Chief Executive Sergio Marchionne on Wednesday told a conference call with analysts he thought the auto business had permanently changed as a result of the collapse in demand that prompted governments to introduce incentives for private buyers, the trade paper said. He also said Fiat expected its alliance with U.S. carmaker Chrysler, of which it owns 20 percent, to produce changes in the volumes of cars produced by each company in different segments, the story said.

“There’s a view out there … which I happen to share that … the actual trading conditions of this business have been permanently altered,” Marchionne told a conference call on Fiat’s third-quarter results. “As a result, I think we will have to keep on focusing on the cost structure as hard as we have in 2009.”

European car makers are reporting robust third-quarter results as they draw on the scrapping schemes  (cash for clunkers), but shares have fallen as investors fret over performance once the subsidies end, the story said. Marchionne was clear about the impact on Fiat, saying if incentives continued in some form in Italy, trading profit would be around 1.5 billion euros next year from the more than 1 billion forecast this year, the news service said. If incentives were pulled however, there would be a drop of 300 million euros in trading profit at the auto unit, and in connected businesses such as engines and components there would be a fall of 75 million euros, he said.

Turning to his plans for Chrysler, which will be unveiled on Nov. 4 in Detroit, Marchionne said there would be changes in the volume mix from that as well, the story said. “There will be cross-pollination of architectures and products across the brands,” Marchionne said in the article. (Reuters)

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