Fiat releases its 3Q results on Thursday – and the loss at Fiat Auto is likely to be over E1 billion for the year to date. More pain can be expected in the coming months before the benefits of the current restructuring process begin to show.
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Fiat’s sales have been severely hit this year – with volumes down 18% across its core European market in the year to the end of September. Such a reduction in sales naturally has a significant impact on profitability – particularly in an industry with a high fixed cost element. It is predicted that this could translate into a loss for the year to date of over E1 billion.
In some respects, the reduction in volumes has been intentional. In part, it reflects the group’s strategy of improving the mix of sales towards higher margin retail sales and away from lower margin sales – for example to rental companies. Fiat has also stated its intention to stop unprofitable sales that it may previously have pursued to protect market share.
Such aims are laudable, but require a corresponding reduction in the scale of Fiat Auto to bring capacity – and costs – more in line with the lower sales volumes. For Fiat to pull off the plan successfully, it will have to bear still more short-term losses.
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