Shares of Fiat Chrysler Automobiles (NYSE:FCAU) are down sharply today, after the double whammy of a disappointing earnings report and the death of its longtime CEO, Sergio Marchionne.
As of 3 p.m. EDT, FCA's shares were down about 12.9% in trading in New York.
FCA reported that its second-quarter profit dropped 35% from a year ago, to 754 million euros ($883 million as of July 25, 2018), on surprisingly weak results in China. During the second quarter, the Chinese government had announced that it planned to cut import duties on certain vehicles in July -- and that news apparently led lots of buyers to postpone purchases of Maserati and Jeep vehicles.
Maserati's total sales volume is small, but it's an important profit center for FCA. With its global sales down 40% in the second quarter, mostly due to China, the unit barely broke even. Add in the pressure on Jeep sales in China, and production snags that slowed the launch of an all-new Ram 1500 pickup in North America, and the stage was set for a disappointing quarter -- and a cut to the company's full-year guidance.
The death of Marchionne only made matters worse. FCA's stalwart 66 year old CEO had entered the hospital for what was thought to be routine surgery several weeks ago. Details of what exactly happened are scant, but complications evidently left him in dire health.
FCA's board had voted to replace Marchionne with longtime Jeep CEO Mike Manley in an emergency meeting last weekend, but the news of his death this morning clearly hit executives and investors hard. Marchionne was the architect of the Fiat-Chrysler merger, improbably succeeding in combining two failing regional automakers into a thriving and profitable global company. He was a giant, he will be missed, and FCA executives and investors were feeling his loss acutely on Wednesday.
FCA cut its full-year guidance, but its outlook for the second half of 2018 is still fairly rosy. The new Ram pickup should help give profitability in North America a boost, and China sales could recover now that the lower import duties are in place.