Fiat Chrysler Automobile's Growth Plan Met With Skepticism and What to Expect From Tesla Motors Today

Two American automakers are making headlines today for different reasons.

May 7, 2014 at 3:00PM
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The Dow Jones Industrial Average (DJINDICES:^DJI) is trading 103 points higher, or 0.63%, by midafternoon after investors digested congressional testimony from Federal Reserve Chairwoman Janet Yellen, who hinted interest rates weren't going up anytime soon, and what could be easing tensions in Ukraine. Russian President Vladimir Putin requested that the Ukrainian government halt military action against pro-Russia separatists in the nation's east and called on those separatists to postpone their May 11 secession referendum.

Looking at the automotive industry today, all eyes are turning toward Fiat Chrysler Automobiles (NASDAQOTH:FIATY) and Tesla Motors (NASDAQ:TSLA).

Fiat Chrysler Automobiles released a plethora of documents and presentations yesterday in hopes of convincing investors that its future remains bright. Unfortunately for FCA, the plan has been met with much skepticism from automotive analysts. The automaker's first-quarter numbers were just as poorly received, with the combination of announcements sending shares nearly 9% lower.

FCA's plan to improve vehicle sales by more than 2 million by 2018 has its fair share of doubters, and those who were somewhat convinced raised questions about the company being able to finance such growth.

"Fiat's massive plan, and the necessary capital expenditure and R&D, simply do not look affordable or prudent," said Max Warburton of Bernstein Research, reported by Reuters. Calling its financial targets "enormously optimistic," Warburton said: "Fiat would do everyone a favor, including its employees, management and shareholders, by raising capital."

It certainly didn't help FCA's case that on the same day it presented very ambitious plans it posted a quarterly net loss of 319 million euros, compared to a 31 million euro profit a year earlier.

Model S Photo Gallery

Tesla Motors Inc Model S. Source: Tesla Motors

Automotive industry watchers are also waiting for Tesla Motors to release its first-quarter results after the market closes today. It's a significantly different company from last year's first quarter, when Tesla recorded $68 million in revenue from zero emission vehicle credits and had an automotive gross margin of 5%. Twelve months later, the electric-vehicle maker is expected to have zero profits from ZEVs and reach an automotive gross margin slightly higher than 25%. 

Analysts surveyed by Bloomberg also expect Tesla to post record revenue of $704.5 million in the first quarter -- a 25% improvement over last year. While the company is still unprofitable in terms of its net income, when excluding one-time items Tesla is expected to post earnings of $0.07 per share in the first quarter.

Deliveries are expected to check in at about 6,400 vehicles in the first quarter, which is above last year's mark but below the record 6,892 vehicles in the fourth quarter because Tesla is shipping 1,000 Model S vehicles to China. Investors will also be listening closely for Tesla's production rate in the first quarter. In the previous quarter, Tesla produced roughly 600 cars per week; that figure is expected to reach 1,000 cars per week in 2014. If the company is to meet its projected deliveries of 35,000 this year, it will need to accelerate production sooner rather than later.

Investors are also hoping more details will be released regarding Tesla's Model X SUV, which is expected to begin deliveries next year. Tesla expects to have production design prototypes by the end of this year.

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Daniel Miller has no position in any stocks mentioned. The Motley Fool recommends Tesla Motors. The Motley Fool owns shares of Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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