FCA Q2 Earnings:Net Cash has been reached,NAFTA margins decline

[Blown7]

Palmer stated works continues on the captive FinCo.

Whats a FinCo??? And what work are they doing?

 

[AlexB]

Whats a FinCo??? And what work are they doing?

Think Ford Credit.....FCA doesn't have an in-house finance company.

 

[Mike V.]

BTW: as I did on "the other site" I will provide a Play-By-Play of the Conference Call as it goes on.

Thank you

Mike

 

[Mike V.]

Think Ford Credit.....FCA doesn't have an in-house finance company.

They need one, it is a profit generator. Just be cautious of subprime loans.

Mike

 

[Mike V.]

Call is over with a nod to Sergio.

What was said?

Mike

 

[Blown7]

Think Ford Credit.....FCA doesn't have an in-house finance company.

So who is my wife sending her checks to every month "Chrysler Capitol"? That's not part of FCA?

 

[Ryan]

So who is my wife sending her checks to every month "Chrysler Capitol"? That's not part of FCA?

Nope.

Chrysler Capital is the Full-Service finance provider for FCA US LLC and its dealers. Chrysler Capital provides full-spectrum automotive finance for FCA US LLC dealers along with fleet, lease, floorplan and business lending solutions. Chrysler Capital is known for its innovative technology and dedication to helping more consumers purchase Chrysler, Dodge, FIAT, Jeep®, Ram, SRT®. Chrysler Capital is a registered trademark of FCA US LLC and licensed to Santander Consumer LLC – a unit of Banco Santander (NYSE: SAN), a global bank with a presence in 52 countries.

 

[Blown7]

Nope.

OK thanks.

So that begs the question "why doesn't FCA have it's own bank already"?, It's not that hard to start a bank.. I thought..

Well bottom line must be they don't have the money???

 

[Mike V.]

Additional info

http://www.autonews.com/article/201...ork-with-chrysler-capital?X-IgnoreUserAgent=1

 

[Bili]

Fiat Chrysler Automobiles NV (FCAU) Q2 2018 Results - Earnings Call Transcript

George Galliers - Evercore ISI

Thank you. And then – no, that's very helpful. And as a second question just on North America, could you provide any detail on where the new Ram production is today versus plan and versus cycle? I think at Q1 you mentioned 60%. Could you give an update to that number and perhaps some insight into any unresolved problems outstanding and what the future costs in fixing those might be?

Michael Mark Manley - Fiat Chrysler Automobiles NV

Yeah. If I may, I'll take that first piece. I think you're right. It was 50%, 55% in the first quarter. We're now at 80%, 85% to full production. We're now beginning to bring on a number of the options that were scheduled later in production as the ramp-up improved, including the full range of powertrains. And I think what we're now working on is the focus to bring those options on and, as I think both Richard and I said, we'll be in full production in fourth quarter.

Richard Keith Palmer - Fiat Chrysler Automobiles NV

Look, with regards to launch costs, George, I think we've had launch costs in both Q1 and Q2 of around €300 million, and we expect those to be significantly reduced in Q3 and substantially eliminated in Q4. So obviously, that's going to give us a lot of tailwind as we go into the second half in terms of margin generation.

George Galliers - Evercore ISI

Understood. And then, just finally on the issues that you're facing in China, or the challenges, in terms of what happened with the tariffs, is it correct to assume that the consumer was looking for the reduction in the list price as the consequence of the fallen duty ahead of the fallen duty actually being implemented? And if that's the case, does that mean that now that you benefit from the lower duty, that kind of headwind diminishes in the second half?

Michael Mark Manley - Fiat Chrysler Automobiles NV

Yeah. No, I think that's exactly the situation. Having worked in the past in China for a long time, they are very, very cost conscious or value conscious, probably, in the segment that Maserati plays in. So we saw a contraction there. And as you may know, many, many factories, including us, had to move early with a repricing of our existing inventory in country to try and stimulate sales. And even with that, the large number of consumers is still wanting to wait.


But that noise, as I mentioned before, is now behind us. And particularly with the source of Maserati, we do benefit in the marketplace, which is why I think our sales rate will increase. What we do need to do now, as Richard talked to, is in January we move into a China 6 emission standard, which means we have to very carefully manage our inventory, particularly with a brand like Maserati, and that's our intention now. So I expect increasing sales, but our shipments will be aligned to the balancing of that inventory, and that's reflected in our guidance.

George Galliers - Evercore ISI

Great. Thank you very much.

Adam Michael Jonas - Morgan Stanley & Co. LLC

I don't have any questions for the call. I just wanted to say that I still feel Sergio's presence on the call. I think he – a light has gone out, a very bright light, but he kindled a lot of other lights and the company is in good hands. Joe, I'll follow-up with you after the call.

Joseph Veltri - Fiat Chrysler Automobiles NV

Thank you, Adam, for the kind words.

José M. Asumendi - JPMorgan Securities Plc

José from JPMorgan. I echo also the comments on Sergio. Thank you, Mike and Richard. Maybe three items; the first one on Europe, WLTP. Where are we on personal certification of cars into WLTP? Is there any risk or opportunity for you going forward? Second, in terms of the U.S., North America and the ramp-up issues from the Ram 1500, I appreciate the comments on the percentages, how the car – the truck has been rolled out. Can you maybe give us some color in terms of the unit sales or the increase in production rate in the second half versus the first half? Maybe in units in production, how is the step-up in Q3, Q4 versus the first half? That would be very useful. And then finally, in looking at Brazil, you're printing nearly 5% margins. I think there's a very strong EBIT opportunity here for the coming two years. There's definitely a change in product mix with the Jeep. Can you talk a bit about the Pernambuco plant? How many Jeep products do you have rolled out there? How is that changing the product mix in Brazil? Any details would be very useful. Thank you.

Michael Mark Manley - Fiat Chrysler Automobiles NV

Thanks, José. It's Mike. With regard to WLTP, obviously, the standard's in from 1st of September because, as you know, the changes – it will change fleet average CO2 emissions and, therefore, unless we are proactive in managing that back down, the consequences are clearly that you're going to pay more money. We've already started work on the new certification to manage our CO2 from a fleet corporate average and that's by driving, where we can in the short term, additional emission reductions. The other thing that we have to protect us is, obviously, mix. We know that we can move mix, but I still think there will be a residual effect on our corporate fleet, really, as we get into 2019.

That number, we've made an assessment and clearly at this moment in time we're baking it in, but the teams are still working to get us back to the corporate-average fleet number that we had pre the change.

In terms of the production numbers on Ram, you okay with that one, Richard?

Richard Keith Palmer - Fiat Chrysler Automobiles NV

Yeah. So obviously, we have two impacts in the second half compared to the first half, both the Light Duty and the Heavy Duty. So substantially between the two, we have about 100,000 units of pickups more in the second half than in the first half as we restart the Heavy Duty for about 40,000 and we continued to ramp up the Light Duty, the new truck, for around 60,000.

Michael Mark Manley - Fiat Chrysler Automobiles NV

And I'm not entirely sure I'll answer the question in Brazil. I'm going to make an attempt, but you can redirect, obviously. Clearly, Pernambuco produces for us both Compass and Renegade. And you can see from our Jeep growth in not just Brazil, but also Argentina and across the region, how that mix is changing and changing dramatically. But we are very, very strong with our Fiat brand and, as we said earlier, we've just regained our market leadership, and that's really from the launches of the two new vehicles.

So when I think about Brazil, I really think about it as having opportunity on both sides, and what we're able to do with our Jeep brand is to make sure it's premium priced, even in segments that don't traditionally overlap because, in Brazil, many people shop on price.


So the guys in Brazil, I think, have done a good job managing that walk. They've done a good job with their separation of their networks, and you're going to continue to see Jeep and, I think, Fiat grow. Obviously, we need to get through the elections later this year and make sure we're settled down as we go into 2019.

José M. Asumendi - JPMorgan Securities Plc

Thank you. Thank you very much.

Stephen Reitman - Société Générale SA

Yes. Good afternoon. Also, I'd like to add my sympathies for very sad day.

If I could turn to two topics, please, Maserati and APAC, you've obviously very clearly explained the issues, you say, relating to China. But when you look at the shipments, obviously, there was a quite substantial drop in most of the other areas; North America down by 22%, Europe down by 23%, and Other down by 35%, and also Japan down as well.

Was there any scope for redirecting vehicles that maybe were destined for China to other markets? Judging by, you can see the shipments here, that doesn't seem to have occurred. So you could you comment maybe on the state of Maserati, the level of inventories globally, and how do you think, also, you're going to fix that, the issues outside China?

And secondly, relating to China as well, you mentioned, of course, the issues with the SUVs there and about your hopes for the Grand Commander, but when I look at the other vehicles you've got on sale in China, Cherokee, Renegade and Compass, your wholesales, I think, were down by about 34% in the first half of the year. The overall SUV market in China was up almost 10%, so clearly a significant underperformance there. So it needs more than the Grand Commander. What else – what other kind of factors do you think you're going to put into play to really to change this quite negative trend? Thank you.

Michael Mark Manley - Fiat Chrysler Automobiles NV

Maserati shipments were down in other areas, but as I mentioned, 70% of the issue is all focused on China. Other areas, for example in the U.S. as you probably know in the premium part of the segment that we cover, we saw a slowdown in terms of the E-SUV and E-sedans. So notwithstanding the fact that they were down, as I said, this is really a China story. I have confidence in the Maserati team and in those other areas to make up whatever the shortfall that they've had today sales-wise. Inventory is another question because we mentioned the management of the inventory in China and that's clearly our biggest focus. In terms of absolute numbers, I don't know. Richard, do you have those?

Richard Keith Palmer - Fiat Chrysler Automobiles NV

Overall in dealer inventory worldwide, we have about three months of stock on an average basis and that number is higher for China. We also have property stock as well, which we need to work through. So, Stephen, one of the reasons why we've adjusted the guidance is because, frankly, the Maserati inventory position is too high. I think to Mike's point, the way you resolve that is we need to execute better commercially, and so I think that's key for the second half of the year.


Michael Mark Manley - Fiat Chrysler Automobiles NV

Moving on to China, you're right. It's not just going to be fixed by Grand Commander, because we have a number of other products in the market that we need to sell. You'll see, and we have done consistently, really pulled back quite heavily on our marketing whilst we work our way through the message and the tone of voice of the brand as we reposition that I mentioned before.

I think the other thing that needs work for us is the strength of our dealer network. We're still not where I would like us to be in terms of the strength of our distribution channel, so that is a key target for us.

And then, finally, we're getting into a period where we are making updates on our vehicles, particularly as we get to the end of this year and next year, whether it's engine updates or changes. And that's important in China as well. So there are certainly a combination of things that we need to fix. That process has started. I think it will take the balance of the year for us to really see the progress that I'm looking for, but the good news is I think we know what they are. We can certainly fix them and I think we have a team in place that will do just that.

Giulio Pescatore - HSBC Trinkaus & Burkhardt AG (Broker)

Hello to everybody and I would like to echo the comments of my colleagues. Moving on to the question, I have two, if I may. The first one it's a follow-up on APAC. You mentioned the impact of increased local competition in the market. Is there something that surprised you, and do you expect local competition to be affecting your long-term plan as you try to better penetrate the market? And the second one, maybe if you could give us a comment on the departure of Mr. Altavilla and is his departure likely to affect your strategy for the EMEA region, and particularly when we look at localized production in Italy? So thank you.

Michael Mark Manley - Fiat Chrysler Automobiles NV

Let me start with Alfredo Altavilla. You know, what I would say is his departure was unfortunate, but it was not unforeseen. And in my press release, as I think was right and proper given his tenure with the company, we needed to thank him for his work. Clearly, he brought EMEA back up to, I think, we said to just around a 3% margin. Now, obviously, there's a new benchmark in the marketplace, so I don't see his departure at all impacting our strategy. In fact, his replacement, which by the way will be announced in the near future, is going to be someone that's capable, really, of closing the gap to that new benchmark and setting a new FCA standard. So for me, I think I wish Alfredo the best of luck and looking forward to the new leadership.

With regard to China, it's no surprise that there's a lot of pressure from local manufacturers. As you know, they fall into those two categories. What we have seen is, obviously, the local brands improving in traction in the marketplace, but they still sit at lower price points than us. And if you look at the contraction in the SUV segments that we saw in the second quarter apart from the large SUV, the contraction was even larger in local brands.


So I think as we tailor our vehicles more to China, which has been a big point for us because in the past, really, they've received our global vehicles, and we tailor our message, not make it so American with the language we would use to describe our brand there and make it more applicable, more accessible, I think we get more competitive. But you can rest assured, we know the Chinese are formidable competitors and we're going to continue the work that we've done to make sure that we can get to the volumes and share we need.

 

[AlexB]

What was said?

Mike

It was Joe Veltri (head of Investor Relations.....who spend his entire work life at versions of Chrysler) thanking everybody for their outreach & thoughts regarding the passing of Sergio.

 

[AlexB]

Very important mention,"Chrysler"/NAFTA near matched Ford North America in EBIT profit, and beated it in EBIT margin during Q2 2018.
Ford North America made EBIT of $1,753 billion which translate in EBIT margin of 7.4.

However if one took out the RAM launch cost, and the F-Series supplier fire cost ($577 million for Ford North America) both FCA's NAFTA and Ford North America reached 10% EBIT margins for Q2 2018 making the stock reactions to both FCAU and F well overdone.

 

[AlexB]

The big thing coming out Ford call was the canceling of the planned Investor Day, along with announcement that Ford over the next four years will spend $7 billion cash on restructuring ($4 billion non-cash writedowns) and give their unprofitability of Europe/South America they pretty much announced plant closures while dancing around actually saying it.
They also in-directly stated they lose money on S-Max/C-Max/Galaxy/Fiesta/Focus/Mondeo in Europe.

 

[Jared B]

OK thanks.

So that begs the question "why doesn't FCA have it's own bank already"?, It's not that hard to start a bank.. I thought..

Well bottom line must be they don't have the money???

https://moparinsiders.com/fca-to-pursue-creation-of-a-captive-financing-arm/ FCA is currently working towards creating or obtaining a Finco for their needs.