Watching your capitalization lose half of its value is never a good thing – even more so if your company is in the middle of a serious restructure. But that’s exactly what has happened to Fiat S.p.A., and investors are worried, given the weak European market and the problems that the U.S. is currently facing.
However, the automaker’s CEO, Sergio Marchionne, remains optimistic that, despite the stock’s poor performance, profit and sales target for 2011 will be met: “We won’t be reviewing 2011 targets until we close the third quarter. For now, we confirm the targets,” he told reporters at Rimini last Wednesday.
Marchionne denied the possibility of a capital increase, saying that the capitalization problem “has nothing to do with our funding” despite the fact that Fiat’s shares were the worst performer in the blue chip FTSE MIB index this month before recovering this week.
The CEO added that the US market is performing well, but in Europe the situation is dire: in Italy, the firm’s domestic market, Fiat has recorded its lowest share since 1996. “The US market continues to go well. We had already forecast that it would head towards 12.7 million cars and never expected it, like others did, to exceed 13 million.”
Mario Spreafico, head of investment at the Italian-based Schroders Private Banking, said “the (Fiat) shares’ recent fall has been too much, and in part is not justified. The problem is to understand in which countries there is a slowdown. Will those that have picked up slow down as well?”
With the Fiat-Chrysler integration process well under way it is, as we reported, Chrysler’s performance is what keeps the group in good shape and exceeding its set targets, offsetting Fiat’s losses in markets like Europe and Brazil.
Nevertheless, Europe continues to pose a serious problem for the group, and one that Marchionne certainly acknowledges: “The European market will go down in 2011 – and I don’t see it doing well in 2012, either.”
Story source: Reuters
