Fiat 2Q profits drop by 55 percent

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Associated Press

Posted on July 30, 2014 at 11:00 AM

Updated Wednesday, Jul 30 at 12:04 PM

MILAN (AP) — Italian carmaker Fiat SpA, which controls Chrysler, on Wednesday said second-quarter profits dropped by more than a half due to lower performance in North and Latin America.

Fiat, whose shareholders vote Friday on the merger with Chrysler, said net profit was 197 million euros ($263 million), compared with 435 million euros in the same period last year. Shares in the automaker were trading down 1.9 percent at 7.45 euros.

North American volumes were up 10 percent boosted by incentives to move legacy Chrysler vehicles, but the incentives also cut into profits. Earnings before interest and tax in the region dropped 18 percent to 598 million euros. The automaker said the drop in second-quarter earnings also reflects a 137-million-euro U.S. tax charge.

Chrysler issues its earnings Aug. 11.

Fiat and Chrysler CEO Sergio Marchionne conceded North America was "a disappointing story" and that the company needs to be "a lot more disciplined on the pricing side," which means also passing along costs to customers of new features and enhancements added to new models.

In June, Chrysler led major automakers in U.S. incentive spending per vehicle with an average of $3,480, according to the TrueCar.com automotive website.

The company, which sells the Chrysler, Dodge, Jeep, Ram and Fiat brands, increased its spending on discounts by 3.7 percent over the same month last year. Ford Motor Co. was the closest competitor to Chrysler at $3,374 per vehicle sold, followed by General Motors at $3,280.

In Latin America, profits plunged by 72 percent to 62 million euros, as vehicle shipments fell 21 percent. Europe, meanwhile, showed signs of stabilizing with Fiat containing losses at 6 million euros, reaching near break-even after years of losses. Fiat's luxury brands Ferrari and Maserati saw deliveries nearly triple, boosting profits by 58 percent.

Fiat said revenues in the quarter rose to 23.3 billion euros, up 1 billion euros over the same quarter last year.

Fiat is in the final stages of its merger with Chrysler, which it took over five years ago. Marchionne said he expects it to be formally completed by mid-October, with a U.S. stock market listing.

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Auto writer Tom Krisher contributed from Detroit.

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