FCA struggling to achieve goals set by aggressive five-year plan

Attemps to secure funds by spinning off Ferrari and postponing new models

2015/07/27

Summary

FCA グローバル生産予測 Recent developments of Fiat Chrysler Automobiles N.V. (FCA) are summarized in this report.

・FCA announced its new five-year business plan in May 2014, which included an aggressive global sales plan with an annual sales target of 7 million units in 2018. At the core of the plan are the globalization of the Jeep and the sales expansion of the Alfa Romeo.

・In 2014, sales of the Jeep successfully exceeded 1 million units. However, LMC Automotive, a British research firm, and many other automotive industry analysts were skeptical that FCA would be capable of achieving global sales of 7 million units in 2018. According to the forecast by LMC Automotive, FCA's 2018 global production will be 5.4 million units.

・FCA's sales have been buoyant but its profits have been comparatively thin. From 2015, FCA's CEO, Sergio Marchionne, has been arguing that companies in the automotive industry should improve their efficiencies through mergers and avoid needless capital investments. He was trying to persuade General Motors (GM) to merge with FCA, but GM declined the proposal.

・FCA plans to spin-off its luxury car unit, Ferrari SpA, to raise funds by the end of 2015. In June 2015, FCA revealed that many of its new model plans have been postponed.


FCA five-year business plan (announced in May 2014)
Summary
Sales target: 7 million units per year  FCA aims for annual sales of 7 million units in 2018, a big increase from 4.4 million units sales in 2013. For sales by brand, FCA aims to expand global production and sales network of the Jeep, and the company also intends to expand the sales of upscale Maserati and Alfa Romeo brands.
Sales expansion in China and North America  For sales by region, FCA aims to achieve annual sales of 1.1 million units in the Asia-Pacific region by the end of 2018, which is more than five times the sales in 2013 (200,000 units). The company expects that the Jeep joint venture in China will contribute to most of this sales expansion. The company also aims for a 50% rise in sales in North America.
Maserati and Alfa Romeo  Maserati will enter the luxury SUV segment. The company will launch six models, which will cover all of the luxury vehicle segments. The company aims for an annual sales volume of 75,000 units in 2018 (15,000 units in 2013). As for Alfa Romeo, eight new models will be introduced by 2018. The company aims for an increase in annual sales from 73,000 units in 2013 to 400,000 units in 2018.
Jeep targets 1.9 million units in 2018  FCA expects that the sale of the Jeep will expand to 1.9 million units in 2018, which is an increase of 1.1 million units from the sales in 2013 (798,000 units). In 2013, five Jeep models were produced at four plants in North America. In 2018, six Jeep models will be produced at ten plants in six countries.
Financial target for 2018: Net profit of EUR 5 billion  FCA has set a net sales target of EUR 132 billion (EUR 86.6 billion in 2013) and a net profit target of EUR 5 billion (EUR 1.95 billion in 2013). The company plans to invest EUR 48 billion in the development of new models and production facilities for a period of five years.

Source: FCA Investor Day Presentations, May 6 and 7, 2014

Progress of five-year business plan (as of July 2015)

Summary
Sales target: 7 million units per year  FCA sold 4.43 million units in 2013 and 4.75 million units in 2014, a 7.2% increase year-over-year (y/y). This rise fell short of the expected growth rate (10% per year) to achieve the annual sales target of 7 million units, but it was the highest growth rate when compared with those of major manufacturers.
Sales expansion in China and North America  Annual sales volume in the Asia-Pacific region increased from 200,000 units in 2013 to 267,000 units in 2014 by 34.2%. Production of the Jeep at the joint venture in China will start in the fourth quarter of 2015. In North America, the company has achieved a one percentage point increase of its market share from 11.4% to 12.4% (the company aims to gain a 14.4% market share by the end of 2018).
Maserati and Alfa Romeo  For Maserati, an upscale midsize SUV, Levante, will be introduced in the fourth quarter of 2015. Maserati's annual sales volume was 15,000 units in 2013 and 33,000 units in 2014. As for Alfa Romeo, production of a new sedan "Giulia" will start in November 2015. The Giulia is expected to generate high volume of sales. However, Alfa Romeo's sales declined from 73,000 units in 2013 to 67,000 units in 2014.
Jeep targets 1.9 million units in 2018  Sales of the Jeep increased from 798,000 units in 2013 to 1 million units in 2014. The Jeep was produced only in North America in 2013. Currently, the Jeeps are also produced in Italy and Brazil. Production in China will start by the end of 2015.
Financial target for 2018: Net profit of EUR 5 billion  FCA had net sales of EUR 86.6 billion in 2013 and EUR 96.1 billion in 2014, up 10.7% y/y. The company achieved its annual growth rate target of 9%. FCA had net profits of EUR 1.95 billion in 2013 and EUR 630 million in 2014. FCA's adjusted net profit did not increase much, which was from EUR 943 million in 2013 to EUR 955 million in 2014.

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