NEW YORK/MILAN -- Fiat Chrysler Automobiles NV plunged as much as 12 percent on a weaker-than-expected outlook and disappointing results in its North American stronghold, as CEO Mike Manley struggles to gain traction seven months into the job.
The forecast for 6.7 billion euros ($7.6 billion) in adjusted earnings before interest and taxes this year fell well below targets that ranged as much as 28 percent higher. The stock drop was the worst since July 25, shortly after Manley took over from the late Sergio Marchionne.
Manley, 54, is battling issues left over from the Marchionne reign, as well as new ones that have emerged on his watch. The Chinese market weakened substantially in the second half of the year, and investors were especially dismayed that earnings in North America missed estimates in the fourth quarter. The region is supposed to be Fiat Chrysler's armor against weakening markets abroad, but the miss on operating profit shook analysts' confidence that management has expenses under control.
"Industrial costs haven't declined as he said they would," Demian Flowers, an analyst with Commerzbank, said in an email. "It doesn't fill you with confidence that they will come in and say, 'Hey, don't worry, it's still fading, it's just happening a bit later.'"
Fiat shares were down 11 percent to 13.59 euros at 13:45 CET in Milan. They have declined 18 percent since Manley made his debut with investors in July.
In Asia, Fiat Chrysler swung to a loss of 296 million euros in the fourth quarter. Margins in Europe were sliced in half by discounting triggered by new emissions tests, and the prospect of a messy UK exit from the European Union has not helped.
Manley had said in the third quarter that costs would come down as the company completed its ramp-up of the new Ram pickup, but those savings failed to materialize, Flowers said.
"It was galling because they had talked about the third quarter margin level -- 'We don't see why this wouldn't be sustainable,'" Flowers said. The profit target for 2019 excludes the Magneti Marelli unit that's being sold, but even so it's far weaker than expected, he said.
Manley, the former head of the Jeep and Ram division, is betting heavily that new Ram pickups and the Jeep Gladiator mid-sized truck will pump up profits even in a flattening U.S. sales environment this year.
North America, which provides the bulk of Fiat Chrysler's profit, posted adjusted Ebit margin equaling 8.6 percent of sales in 2018, up from 7.9 percent a year ago. Overall, profit margins are expected to stay steady at 6.1 percent of sales this year.
Under Marchionne, who died on July 25, Fiat Chrysler had difficulty establishing itself in China, the world's largest car market. The automaker tweaked its SUV lineup there to appeal to more Chinese consumers, but it has not helped as the region recorded its first annual slump in 20 years.
Maserati sales also continued to be weak, a stubborn problem Manley identified soon after taking over as CEO. The brand, split off from Alfa Romeo in October as part of a broader shake-up, gets about 50 percent of its profit from China. Manley has said he did not expect a rebound in sales until the second half of 2019.
