FCA loses $1.84B in Q1 as COVID-19 shuts down plants

Fiat Chrysler Automobiles NV expects to begin restarting most plants in North America the week of May 18 after reporting a net loss of $1.84 billion in the first three months of the year.

The COVID-19 pandemic temporarily shut down all of the Italian American automaker’s plants from China to South America, contributing to a 16% year-over-year decrease in revenue to $22.3 billion. Adjusted pre-tax earnings were $56.3 million, down 95%. The results illustrate the crippling nature of the outbreak on automakers’ bottom lines, despite the production suspension in North America lasting less than two weeks of the first quarter.

“The pandemic has had, and continues to have, a significant impact on our operations,” CEO Mike Manley said in a statement. “With our experienced leadership team and dedicated employees, I have the utmost confidence in our ability to navigate through this crisis and emerge well-positioned to grow and prosper on the other side.”

North American plants will ramp-up progressively starting the week of May 18 except for Belvidere Assembly in Illinois, which will begin by June 1. Additional safety procedures may require a reduction in jobs per hour, the company said, and it will align production with consumer demand. Electrified, high-margin and low-inventory vehicles will take precedence.

Neither General Motors Co. nor Ford Motor Co. publicly have committed to a restart date, though discussions with the Michigan government appeared to be coalescing around May 18, according to a source familiar with the situation that was first reported by The Wall Street Journal.

But that depends on complex coordination by automakers with suppliers, conflicting stay-at-home policies in various states and the political and public health agendas of at least three national governments: Mexico, Canada and the United States.

Fiat Chrysler did restart one of its plants and supporting components operations last week in Italy. North American executives expect to mirror here the rollout of new health and safety protocols from there and in China.

But with no cars, trucks or SUVs rolling off North American assembly lines into late May — halfway into the second quarter — Fiat Chrysler has withdrawn its $7.8 billion pre-tax earnings 2020 guidance it set in October. The company said it will provide an update when it has “better visibility of the overall impact of the crisis,” though it expects virus’s impact to be even worse on the second quarter.

Other targets also are moving. Key product launches are being delayed by three months, though no programs have been canceled to date. Major construction projects, including at its new assembly plant on Detroit’s east side formerly occupied by the Mack Avenue Engine Complex and at the Warren Truck Assembly Plant, paused because of the virus. It also has halted nonessential projects that were in development to conserve on cash, putting nearly 2,000 supplemental contract workers out of a job across North America.

The automaker, however, said it remains committed to merging with French automaker Groupe PSA of Peugeot and Citroën by the end of the year or in early 2021.

Fiat Chrysler’s shares were down 0.4% in pre-market trading on Tuesday. Its stock closed down Monday almost 44% year-over-year.

In the first quarter, adjusted diluted loss per share was $1.17. FCA’s 3.8% pre-tax margin in North America fell from 6.5% a year earlier. U.S. sales fell 10% year-over-year.

But Fiat Chrysler did better than the industry overall, increasing its U.S. market share to 13%, according to Cox Automotive Inc. Its average transaction price climbed nearly 7% to $40,894, a record for the first quarter, according to Kelley Blue Book, though incentives spending rose 12% to $4,986 per vehicle. Ram was the only brand to see a sales increase with its pickups climbing 7%, though it was not enough to stop General Motors Co.’s Chevrolet Silverado from regaining its sales lead.

Fiat Chrysler’s first-quarter adjusted pre-tax earnings in North America were $594 million, a 48% decrease. It lost $293 million in Europe, $63.9 million in Asia and $29.3 million in Latin America. The Maserati luxury brand lost $81.3 million.

Fiat Chrysler’s industrial-free cash flow dropped to a negative $5.5 billion. Cash is critical for automakers to weather the production shutdown and is an asset analysts are watching closely. Available liquidity totaled $20.2 billion at the end of the first quarter.

The automaker has taken several steps to preserve cash. It took out a loan of $3.8 billion in credit facilities in April. In addition to halting some projects and lowering marketing spending, executives are taking pay cuts and salaried employees are seeing 20% of their incomes deferred for up to three months. Overall personnel costs halved during the plant shutdown.

The company approximates a $1.08 billion decrease in capital expenditures and $2.17 billion in eliminated operating costs for the year.

Fiat Chrysler last reported a net loss in the third quarter of 2019 because of expenses related to changes in plants in Europe and at its premium Alfa Romeo brand, but the company reported record pre-tax earnings in North America for those three months.

Fiat Chrysler’s 2020 first-quarter results beat/fell short of Ford Motor Co., which last week reported a net loss of $2 billion on revenue of $34 billion for January, February and March.GM on Wednesday is scheduled to report its first-quarter financial results. Silicon Valley electric-car maker Tesla Inc. eked out a $16 million net profit.


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