Fiat has reduced profit estimates for its Chrysler U.S. division and will focus on reducing the losses in Europe to meet the annual target of the group.
Chrysler’s operating profit may miss the initial estimates by up to 13%, as the company is spending money to launch new models such as the Jeep Cherokee. Chrysler expects an operating profit this year from $3.3 billion to $3.8 billion, below the original estimate of about $3.8 billion, according to Bloomberg.
Chrysler’s net profit fell 16% in the second quarter to $507 million, compared to the same period last year. Revenue rose 7 percent to $18 billion.
“Chrysler, which used to be the strength of the group and Fiat’s main competitive advantage versus its European competitors, is carrying the negative news,” said Vincenzo Longo, an analyst at IG Group in Milan.
Chief executive officer of Fiat, Sergio Marchionne, who also heads Chrysler, reduced the investment in new models for Europe, due to the market downturn. Sales of Fiat cars in Europe fell by 10 percent in the first half of the year more than the 6.7 percent decline of the market.
“The timing of product launches and capacity increases causes this year’s performance to be biased to the second half. A continued aggressive drive for excellence and flawless execution will be essential to attain the targets we’ve set for ourselves,” said Marchionne in a statement.
For its global business development, Fiat intends to fully take over Chrysler.
Fiat confirmed the group’s annual targets, after taking cost-cutting measures that have reduced losses in Europe. The group anticipates a profit this year from commercial operations of €4 billion to €4.5 billion, up from €3.81 billion in 2012.
Losses in Europe declined in the second quarter to €98 million from €138 million a year ago.
Fiat shares fell 4.8 percent on Tuesday at the Milan stock exchange and have been suspended from trading.
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