Fiat Chrysler Automobiles (NYSE:FCAU) said that it lost 1.7 billion euros ($1.85 billion) in the first quarter, down from a profit of 1.1 billion euros a year ago, as the coronavirus pandemic disrupted its production and sales in key markets around the world.
Fiat Chrysler Automobiles (FCA), which suspended its guidance for 2020 when it shut down U.S. factories on March 18, didn't provide revised guidance for the year with its earnings report. But it did say that it is "fully prepared to restart production" around the world as conditions allow, and that it has ample liquidity to ride out the COVID-19 storm.
The raw numbers
FCA reports its financial results in euros. As of May 5, 1 euro = about $1.09.
|Metric||Q1 2020||Change (Decline) vs. Q1 2019|
|Revenue||20.567 billion euros||(16%)|
|Vehicles shipped (rounded to the nearest thousand)||818,000||(21%)|
|Adjusted EBIT (earnings before interest and tax)||52 million euros||(95%)|
|Adjusted EBIT margin||0.3%||(4.1 pp)|
|Net income (loss)||(1.694 billion euros)||2.76 billion euros lower|
|Industrial free cash flow||(5.07 billion euros)||4.8 billion euros lower|
What happened at FCA during the first quarter
Here's how things played out at each of FCA's business units.
- North America's adjusted EBIT fell by almost half, to 548 million euros, on a 16% decline in shipments due largely to the suspension of production on March 18. Revenue was down 9%, helped a bit by a more favorable vehicle mix than in the year-ago period. FCA noted that over 90% of its dealers in North America are currently open for sales or able to sell online.
- APAC, or Asia-Pacific, Australia, and China, posted an adjusted EBIT loss of 59 million euros, slightly worse than a year ago. Combined shipments from FCA and its Chinese joint ventures were down 49% from a year ago, to about 20,000 units, largely because of the virus-related production halt that began on Jan. 23 in China.
- EMEA, or Europe, the Middle East, and Africa, posted an adjusted EBIT loss of 270 million euros, 251 million euros worse than a year ago, as combined shipments fell 31%. FCA, which has several factories in hard-hit northern Italy, began suspending production in Europe on March 11.
- LATAM, or Latin America, lost 27 million euros on an adjusted-EBIT basis, down from a profit of 105 million euros a year ago. Shipments fell 12%, largely due to the suspension of production on March 23.
- Maserati, which sells a significant percentage of its vehicles in China, lost 75 million euros on an adjusted-EBIT basis, versus a profit of 11 million euros a year ago. Shipments fell 44%, to about 3,100 vehicles, on market disruption in China and Europe and the suspension of production on March 12.
FCA bolstered its balance sheet in April and might raise more cash
This happened after the end of the first quarter, but we should note here that in April, FCA and its banks agreed to a new revolving line of credit for 3.5 billion euros.
There might be more liquidity-enhancing moves to come. FCA said in a statement that investors should expect it to raise more cash if needed: "We continue to assess all funding options and expect to access funding as and when available on reasonable terms to further strengthen our balance sheet and enhance our liquidity to optimize our financial flexibility."
When will FCA reopen its factories?
- In North America, FCA expects to reopen all but one of its factories during the week of May 18. (The United Auto Workers labor union has yet to sign off on that date.) The one exception, an assembly plant in Belvidere, Illinois, that makes the Jeep Cherokee, will reopen by June 1, FCA said.
- The two factories owned by FCA's joint ventures in China reopened in February.
- FCA's plant in Ranjangaon, India, will reopen on May 18.
- Three of FCA's plants in Italy reopened on April 27. The remainder of its European factories, including Maserati's three factories, will open in phases, starting in late May. FCA expects to have them all running by early July.
- FCA's factories in Latin America will reopen on May 11.
Special items, debt, and cash
FCA took 1.1 billion euros in one-time charges in the quarter, including roughly 600 million euros in pre-tax impairments, and write-offs of deferred tax assets totaling about 500 million euros.
As of March 31, FCA had total available liquidity of 18.6 billion euros, down from 23.1 billion euros at the end of 2019. Against that, it had 14.2 billion euros in long-term debt outstanding, with 4.8 billion euros of that due by the end of 2020.
(The March 31 debt and liquidity figures don't include that new credit line for 3.5 billion euros that FCA set up in April.)
Looking ahead: FCA's expectations for 2020
FCA didn't provide auto investors with updated guidance for 2020, citing the continuing uncertainties amid the pandemic. But it did provide its outlook for the overall industry in its four key regions around the world.
For the full year, FCA currently expects that:
- Total light-vehicle sales in North America will fall 28% from 2019. Total sales in the U.S. will be about 12.5 million vehicles, down 29% from last year.
- Total sales of passenger cars and light commercial vehicles in Europe will fall 23% from 2019, to about 17.7 million vehicles.
- Sales of passenger cars and light commercial vehicles in Latin America will fall 29% from a year ago, to about 3 million vehicles. Sales in Brazil, FCA's largest market in the region, will fall 30% to about 1.9 million.
- Total passenger car sales in the Asia Pacific region will fall 13% to 27.1 million; sales in China will fall 13% to 18.6 million.