Fiat Chrysler Affirms Forecast for Profit Jump After Truck Shift

Fiat Chrysler Automobiles NV committed to meeting ambitious 2018 financial targets set by outgoing Chief Executive Officer Sergio Marchionne as a fruitful shift to pickups and SUVs gains momentum.

Adjusted earnings before interest and taxes will climb to at least 8.7 billion euros ($10.8 billion) this year, at the lower end of a profit range targeted in a five-year business plan. Fourth-quarter earnings on that basis jumped 22 percent, the Italian-American carmaker said in a statement Thursday.

Marchionne has bolstered profit margin by converting car plants to manufacture more lucrative sport utility vehicles and trucks. It’s a playbook that Ford Motor Co. has signaled it will imitate after years of coming up short of earnings targets. For Fiat Chrysler, new versions of the Jeep Wrangler SUV and Ram 1500 pickup, plus a refreshed Jeep Cherokee, are slated to begin selling in the first few months of this year.

“Investors have recognized the margin improvement that developed in the fourth quarter and should continue in 2018,” Richard Hilgert, an analyst with Morningstar Inc., said in an email.

Fiat Chrysler’s U.S.-listed shares jumped as much as 3.3 percent to $24.95 as of 9:31 a.m. in New York. The stock is on track for a record close after gaining by more than a third already this year and almost doubling in 2017.

Marchionne, 65, dumped the Dodge Dart and Chrysler 200 from its U.S. lineup and has transitioned the factories that used to make those models into Jeep SUV and Ram truck plants. That bet has paid off: Fiat Chrysler posted $8.8 billion in adjusted Ebit last year. Ford, which reported adjusted pretax profit fell to $8.4 billion in 2017, is now planning to pull struggling sedans from showrooms and sell more SUVs.

Marked for Death: Detroit Ditching Cars to Mint Money Off Trucks

Improving margins in North America led to $5,500 profit-sharing checks on average for United Auto Workers union members, up from $5,000 a year earlier. Those payouts will be on top of a $2,000 bonus paid to all U.S. workers, except for top executives, related to the U.S. corporate tax cut that Marchionne has estimated will save the company $1 billion a year.

Fiat Chrysler cut its industrial debt almost in half last year, to 2.39 billion euros from 4.59 billion. The company could have more industrial cash than debt by the end of the second quarter, the CEO said last week in Detroit.

Marchionne plans to retire early next year after seeing the business plan through 2018 to completion and setting out a new mid-term strategy in coming months. The CEO, who has run Fiat since 2004, has said he expects one of the carmaker’s top managers to succeed him.