The U.S. arm of Fiat Chrysler Automobiles NV said its
second-quarter profit slipped more than 3% with debt payments and
government fines masking the company's strong performance as
consumers snapped up bigger and more expensive pickup trucks and
sport-utility vehicles.
Net income fell to $598 million from $619 million a year
earlier. The company spent $90 million alone on fines issued by the
National Highway Traffic Safety Administration for oversights in
the recalls of its vehicles.
Operating profit rose 37% to $1.4 billion as revenue climbed 11%
to $22.6 billion. The U.S. auto industry is on a roll with analysts
expecting new vehicle sales to surpass 17 million for the first
time since 2001.
"It is the highest operating profit since we formed the company
in 2009," Chief Financial Officer Richard Palmer said during a
conference call.
While the results underscore the auto maker's financial health,
they likely put Chief Executive Sergio Marchionne in a tough spot
as he negotiates a new contract with the United Auto Workers. The
UAW is anxious to claw back concessions given over the past six
years. Fiat Chrysler has said it needs to hold the line on wages
and costs in order to remain competitive. Negotiations are
continuing as the contract expires in September.
Fiat Chrysler said last week its overall net profit rose 69% to
$366 million, thanks in large part to the North American division,
which saw its operating margin more than double to 7.7% as it sold
more Ram pickup trucks and Grand Cherokee SUVs. Fiat Chrysler still
lags behind competitors Ford Motor Co. and General Motors Co. which
saw their North American profit margins climb to 10.5% and 11.1%
respectively during the quarter.
The U.S. unit is required to report its earnings separately
because of its publicly held debt. The Fiat Chrysler U.S. arm
includes results from Canada, Mexico and some international
markets.
Write to Jeff Bennett at Jeff.Bennett@wsj.com
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