Fiat Chrysler profit rises, outlook ‘firm’ ahead of Peugeot merger

By Giulio Piovaccari and Paul Lienert

MILAN/DETROIT (Reuters) – Fiat Chrysler <FCHA.MI> <FCAU.N> posted a 7% rise in fourth-quarter profit on Thursday, boosted by strong business in North America and better results in Latin America as it headed into a merger with ’s PSA <PEUP.PA>.

In a briefing with analysts, Chief Executive Officer Manley said FCA was still “firm” on its financial guidance for . Still, he warned that disruptions due to deadly coronavirus outbreak in China could threaten production at one of Fiat Chrysler’s European plants within two to four weeks. He did not identify which plant could be affected.

FCA so far has not reported production shutdowns at plants outside China related to the outbreak. Chinese auto parts and assembly plants have extended previously planned Lunar New Year’s shutdowns through Feb. 9, and some have pushed the shutdowns out further.

FCA operates in China through a loss-making joint venture with Guangzhou Automobile Group (GAC) <601238.SS> and has a 0.35% share of the Chinese passenger car market.

Manley said FCA plans to meet tighter emissions regulations in Europe initially with new hybrid gasoline- versions of several Jeep models, with plans to shift eventually to more pure electric models beyond 2025.

He said the automaker expected to meet future emissions standards without buying credits from electric carmaker Tesla after 2021 in Europe and after 2023 in the United States as it introduces more hybrid models that produce lower emissions.

“Beyond 2025, full electric (vehicles) will become the norm” across the industry, Manley said, ultimately replacing hybrids which are facing future bans in several countries.

Asked about FCA’s -term reliance on hybrids rather than pure electric vehicles to meet lower CO2 levels, he said, “We are going to be part of that solution” with future electric vehicles, but “in the most cost-effective way we possibly can.”

The Italian-American carmaker said adjusted earnings before interest and tax (EBIT) rose to 2.12 billion euros ($2.3 billion), in line with a 2.11 billion forecast in a Reuters poll of analysts.

That left its adjusted operating profit for the year at 6.67 billion euros, just shy of its target of over 6.7 billion euros. Its adjusted EBITDA margin came in at 6.2%, in line with its target of more than 6.1%.

A trader said Fiat Chrysler (FCA) results were “a touch above” expectations, and the carmaker’s shares in New York were up 1.3% in early trading, while shares in Milan were up 1.9%.

Fiat Chrysler (FCA) and Peugeot maker PSA agreed in December to combine forces in a $50 billion deal to create the world’s . 4 carmaker, in response to slower global demand and the mounting cost of making cleaner cars amid tighter emissions rules.

Manley said last month that talks with PSA were progressing and he hoped to complete the deal by early 2021.

FCA reiterated its plan to boost adjusted EBIT to more than 7 billion euros this year.

($1 = 0.9091 euros)

(Reporting by Giulio Piovaccari in Milan and Paul Lienert in Detroit; Additional reporting by Joe White and Danilo Masoni; Editing by Jason Neely, David Clarke and Bernadette Baum)