Fiat Chrysler sees 2017 debt almost halving amid cash push

Bloomberg

Fiat Chrysler Automobiles NV expects debt to fall by at least 45 percent this year as the Italian-American carmaker enters the final stretch of a plan to turn liabilities into cash by selling more expensive autos. The stock jumped.
Net industrial debt will narrow to less than 2.5 billion euros ($2.7 billion) this year from 4.6 billion euros at the end of 2016, Fiat Chrysler said in a statement on Thursday. Fiat’s financials are getting a boost from rising earnings, which gained 26 percent to 6.1 billion euros in 2016 as the company shifted sales to more lucrative sport utility vehicles and away from sedans.
Eliminating debt is one of the key challenges Chief Executive Officer Sergio Marchionne faces to fulfill an ambitious financial plan before he retires in 2019. Another obstacle is an investigation announced by US regulators in December over FCA’s alleged failure to disclose emissions-violating software. The company, which has been disputing the claims, didn’t say in the statement whether it would be setting aside a provision to cover potential fines and recalls.
Fiat’s stock rose as much as 4.8 percent in Milan trading, and was
2.8 percent higher at 10.50 euros at 1:20 p.m., bringing the gain so far this year to about 21 percent. The company said it’s confident it can reach its aim of having at least 4 billion euros of cash by 2018 and posting adjusted earnings before interest and tax of as much as 9.8 billion euros.
“FCA this morning provided guidance which is materially ahead of the street,” Evercore ISI analyst George Galliers wrote in a note to clients. The stock is “cheap,” he said.
Fiat improved its profitability across all regions, even as sector sales growth in the US and Europe is slowing amid waning recoveries. In North America, its margin on adjusted earnings before interest and taxes rose to 7.4 percent in 2016 from 6.4 percent a year earlier, as earnings surged 15 percent despite flat sales. The company reaped about 85 percent of its profit in that region last year. Earnings more than doubled in Europe and Asia.

TRUMP TIES
Profitability in all regions was bolstered by demand for the Maserati Levante SUV, which helped the brand more than triple its earnings in 2016 and lift the margin to 9.7 percent from 4.4 percent a year earlier. Jeep posted a record year with over 1.4 million deliveries.
Despite the emissions investigation, Marchionne has been off to a good start under the new US administration.
His $1 billion plan to produce in the US three new Jeeps and a Ram pickup now made in Mexico won plaudits from President Donald Trump as he pressures the auto industry to manufacture north of the border.