Milan: Fiat Chrysler Automobiles on Thursday raised its revenue forecast after strong sales in North American and a recovery in the European market boosted second-quarter profits by 70 percent.
The rosy results come as the carmaker will be required to pay millions of dollars to get potentially defective Ram pickups and older Jeeps off the road under a deal with safety regulators to settle allegations of mishandling nearly two dozen recalls.
The company said in a presentation to analysts today that it didn't expect the Ram buyback offer to cost more than USD 20 million.
Fiat Chrysler reported its net profit in the three months ending June 30 was 333 million euros (USD 364 million), compared with 197 million euros in the same period last year.
It said it was raising its revenue forecast to 110 billion euros from 108 billion euros, on worldwide shipments of 4.8 million units, at the low end of the previous range. It maintained its net profit forecast of between 1 billion euros and 1.2 billion euros.
Shares rose 5.2 percent to 13.91 euros in Milan trading. Although the Ram buyback offer potentially covered 585,000 trucks with faulty steering components, Fiat Chrysler said it already has repaired 410,000, and those customers aren't eligible for the buybacks.
That leaves about 175,000 trucks eligible for repurchase at the original sales price minus depreciation, plus a 10 percent premium.
In an consent agreement with the National Highway Traffic Safety Administration announced last weekend, FCA was assessed a record USD 105 million penalty for recall problems including delays in notifying customers, distributing parts and notifying NHTSA of problems.
It must pay a USD 70 million civil fine, plus make USD 20 million in safety-related improvements. Another USD 15 million would be assessed if the company violates the agreement.
CEO Sergio Marchionne said the company will pay the USD 70 million shortly, and said the buyback costs can be included in the USD 20 million. "We do not expect to incur any material cost beyond the USD 20 million available under the consent order," Marchionne said today.
He said the company notified customers on time 98 percent of the time. "That's not an excuse and we must and will do better about this," he said. "We need to achieve 100 percent. There are no questions and no excuses in connection with this objective."
