Fiat profit doubles in 2011 thanks to Chrysler

MILAN (AP) — Fiat SpA, the Italian automaker that controls Chrysler, reported strong 2011 earnings on Wednesday thanks to Chrysler's turnaround while casting doubt on its expansion plans in Europe due the devastating impact of the debt crisis on the car market.

Fiat's results exceeded the company's own expectations as it seeks to establish itself as a global carmaker.

The company, which owns a 58.5 percent share of Chrysler LLC, doubled net profit attributable to the parent company to euro1.3 billion ($1.71 billion) from euro520 million a year earlier. Revenues increased 66 percent to euro59.5 billion.

The trading profit — or earnings before interest, taxes and one-time items — was euro2.3 billion ($3.03 billion), compared with the target of more than euro2.1 billion ($2.77 billion).

Investors cheered the results, sending Fiat shares up 5 percent on the day, but Fiat and Chrysler CEO Sergio Marchionne said the European brands had to do better.

He noted on a conference call that all of Fiat's net income last year came from Chrysler, which was consolidated in its results for just seven months.

"Somebody better get off their butts and snap on to the grid. We're not pulling the cart here," Marchionne said. "Being European doesn't entitle them to be economically inefficient."

Fiat Group Autos, which comprises the Fiat, Lancia and Alfa Romeo brands, saw annual vehicle shipments slip 2.4 percent to 2 million, due largely to declining European sales, whereas Chrysler sales jumped 22 percent.

Marchionne has been trying to make Fiat plants more efficient, demanding new work rules at its Italian plants and attempting to cut excess capacity, which resulted in the closure last year of a plant in Sicily.

Despite those efforts, the plants in Italy were still running at 50 percent capacity, compared with 92 percent in North America and 118 percent in Poland and Turkey, according to the company.

In its earnings statement, Fiat cast doubt on its development plans in Europe for 2014 — a period during which it previously had sought to double production in Italy — citing the grim market outlook as the European debt crisis continues to hamper economic growth and consumer appetite.

"The level of uncertainty regarding economic activity in the eurozone in the foreseeable future has made specific point projections of financial performance unreliable," Fiat said in a statement.

In Europe, the car market contracted by 1.4 percent last year to 13.6 million cars. While demand was up in Germany, it declined in Fiat's main Italian market by 11 percent on top of a 9 percent slide in 2010.

"If we see a structural change in European demand that is permanent, than even the best intentions of Fiat cannot resolve the issue," Marchionne told analysts and investors on a conference call. He said Fiat would watch the performance in the eurozone in the next six months before drawing conclusions.

"We lack the unified answer that is required to move Europe out of the doldrums it is in," Marchionne said, referring to European leaders' efforts to persuade financial markets that they can deal with the market turmoil.

Marchionne, however, ruled out a return of scrappage plans, which helped Fiat in particular in 2008, saying it would be "unhelpful" to the industry that needs to find its own balance between supply and demand.

Chrysler sold 1.85 million vehicles last year, thanks to higher demand for Jeeps and revamped model lines under the Fiat partnership. Including cars still in the dealer pipeline, Chrysler delivered 2 million vehicles to give the combined Fiat-Chrysler volumes of 4 million last year, making it the seventh largest automaker.

Marchionne is seeking to create an automaker that can produce 6 million cars a year by 2014.

Fiat is counting on the U.S. company's continued strength. It forecast 2012 revenues of euro77 billion and net profit of euro1.2 to euro1.5 billion — the range due to the uncertain market in Europe.

In the fourth quarter, Fiat's net profit attributable to the parent company euro43 million, down from euro139 million a year earlier, reflecting its less-than-full control of Chrysler and Ferrari, at 90 percent. Revenue more than doubled to euro19.6 billion, but was flat without Chrysler's contribution.

In Fiat Group Autos, an increase of light commercial vehicle volumes failed to offset lower passenger car shipments, which declined last year by 4.6 percent to 1.6 million, as demand in Fiat's domestic Italian market shrank significantly. Demand grew 1.5 percent in Brazil to 772,700 vehicles.

Ferrari, however, hit a record volume of 7,195 vehicles, a 10 percent increase over 2011, driven by sales of 12-cylinder models. Revenues at Ferrari rose 17 percent to euro2.25 billion, while Maserati revenues hit euro588 million on volumes of 6,159 vehicles.

Marchionne noted that Ferrari's market value remained unrealized, but indicated it was not the right moment for an IPO.

Net industrial debt, which stood at euro5.5 billion at the end of 2011, is forecast to remain flat or grow to euro6 billion.

Fiat proposed a dividend to preference and savings classes of shareholders, not to ordinary shareholders.

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Tom Krisher in Detroit contributed to this report.