Fiat Chrysler Automobiles (FCAU) reported a strong second-quarter profit gain Wednesday but said it expects it will likely stop making sedans in the U.S.by Q1 2017.
Advertisement
Instead of auto production, the third largest United States auto manufacturer will produce large sport utility vehicles (SUVs) and pickup trucks, mainly Ram and Jeep brands in the country.
Net revenues for the quarter declined 2 percent to 27.89 billion euros from 28.54 billion euros in the same quarter previous year. Currently Ram 1500 is produced in Warren. The decline was driven by APAC due to transition to local Jeep production in China.
Facilities that are now building models such as the Dodge Dart or the Chrysler 200 will switch to delivering SUVs and trucks, with the end goal to have the full Fiat Chrysler factory footprint dedicated to rolling out Ram trucks and Jeep SUVs.
“There will be no passenger cars that will be produced in the USA, and therefore, our expectation is that concentration will give us the possibility to get very close” to the 12.1% profit margin that General Motors reported as part of its second-quarter earnings last week. “We expect quality of USA sales to decline over the next 18 months on the back of higher incentives across the industry”. Other passenger auto models production will be shifted to foreign markets, such as Canada and Mexico.
Amid announcing changes to the way it reports US auto sales, Fiat Chrysler said Tuesday it was conducting a similar review on this side of the border.
Last year, FCA was the top-selling automaker in Canada – the first time it reached that milestone during its 90-year history.
That agreement, combined with other benefits, erodes the ability of the Detroit Three to make a profit off lower-priced small cars in the U.S.
In its statement on Tuesday, the company said monthly US sales reports in the past have had no impact on its reported revenue or financial statements issued quarterly.
Advertisement
Overall, Jeep sales grew 17 percent globally for FCA in the quarter, with increases for the brand coming across all markets. Company net profit margin stands at 8.10% whereas its return on equity (ROE) is 31.30%. These were partially offset by charges for Takata airbag inflator recalls.
