Chrysler fuels profits at newly merged Fiat Chrysler Automobiles
The newly merged Chrysler and Fiat auto companies reported profitable fourth quarters Wednesday and announced a series of transactions that will combine control of the carmakers into a Netherlands-based holding company.
The creation of Fiat Chrysler Automobiles -- the name of the combined company -- demonstrates the increasingly global nature of the auto business.
While the headquarters, essentially the administrative function of the business -- will be based in the Netherlands, shares of the automaker will trade on the New York Stock Exchange. The bulk of the automotive research and development will go on at the Chrysler offices in Detroit and Fiat’s headquarters in Turin, Italy. But, the company will be based in Britain for tax purposes.
“Today we can say that we have succeeded in creating solid foundations for a global automaker with a mix of experience and know-how on a level with the best of our competitors,” said Sergio Marchionne, who serves as chief executive of Chrysler and Fiat.
The merged business will build on “two organizations each with a great history in the automotive industry and different but complementary geographic strengths,” said John Elkann, chairman of Fiat.
The most recent financial results also demonstrated how important a cog Chrysler will be in the new business.
Fiat said it earned nearly €943 million last year, after special tax benefits, the automaker said. But Fiat would have reported a loss of €911 million for the year if it wasn’t for the profits it earned through its interest in Chrysler.
Similarly, Fiat’s interest in Chrysler swung the Italian automaker from what would have been a loss in the fourth quarter to a profit of €252 million after the special tax items.
As of last year, Fiat owned 58.5% of Chrysler’s shares through a deal launched during the bankruptcy restructuring of the Auburn Hills, Mich., automaker in 2009. This month it bought the rest of Chrysler’s shares from the UAW Retiree Medical Benefits Trust in a $4.35-billion deal.
Thanks to a resurgent U.S. auto market, Chrysler has posted 10 consecutive profitable quarters. Its earnings have bolstered Fiat, which has struggled through a recession in much of Europe.
Chrysler said it earned $1.6 billion in the fourth quarter, up from $378 million in the same period a year earlier. But much of the profit was the result of an accounting valuation for deferred tax assets. Excluding that item, Chrysler earned $659 million in quarter.
For the year, Chrysler earned $2.8 billion compared to $1.7 billion in the prior year. Excluding the tax item, it posted a $1.8 billion profit.
Chrysler has seen big increases in sales of its Jeep brand and Ram trucks. Its U.S. market share grew to 11.4% from 11.2% last year.
Worldwide, Chrysler sold 2.4 million vehicles last year, a 9% gain.
“Looking ahead to 2014, Chrysler is well positioned for continued growth,” said Alec Gutierrez, senior analyst at Kelley Blue Book. “The introduction of the redesigned Chrysler 200 will be the next key product launch for a Chrysler brand that has been lacking a competitive mid-size sedan.”