Profit warning at thriving US Chrysler unit hits Fiat

Fiat's US unit Chrysler, which generates most of the group's net profit, has lowered its outlook as it struggled to fill orders due to parts shortages, hitting the Italian car-maker's shares.

Chrysler's recent booming US sales have compensated for Fiat's losses in Europe, where demand hit 20-year lows in the first half of the year.

Fiat-Chrysler chief executive Sergio Marchionne said Chrysler had seen parts shortages at most of its plants as it tried to keep up with strong demand, which, in turn, had resulted in lost volumes.

Chrysler trimmed its full-year net profit forecasts to a range between $1.7 billion and $2.2 billion, from $2.2 billion.

Chrysler's competitors General Motors and Ford both trounced expectations in their earnings releases last week. Supply chain glitches have been magnified at the much smaller and less diversified Chrysler, which is overly dependent on Jeep and truck models to make money.

A high-selling discontinued model, the Jeep Liberty, no longer fed through to the bottom line. The Liberty’s replacement, the Cherokee, will be in dealerships from August.

“We’re trying to reduce the recurrence of these events, but they keep on happening at a sufficient rate that we had look at the forecast and admit that the overall number that we had set for the year may be at risk,” Mr Marchionne said. “That’s why we’ve prudently taken it to the low end of the range.”

Fiat, which owns 58.5 per cent of Chrysler, plans eventually to merge the two car-makers.

In a separate statement, Fiat confirmed the financial 2013 targets of the combined group’s 2013 financial targets. It said Fiat’s losses in Europe narrowed in the second quarter to €98 million.

Chrysler’s production rate has gone from 1 million cars a year in 2010 to 2½ times that rate and the company will add another 200,000 vehicles of annual output next year, Mr Marchionne said, causing stress on the supplier network.– (Reuters)