Two of Europe's Big Eight automakers weighed in with 1999 earnings reports last week that again underscore the relationship of product to profitability.
Fiat Auto, which finished 1999 as Europe's No. 6 automaker on sales of 1.44 million units, said its operating loss for the full year widened to 121 million euros, or about $122 million at current exchange rates, from 108 million euros a year earlier. But the company, citing strong demand for the new Punto supermini, returned to profit in the fourth quarter after five consecutive quarters of losses. Sales increased 10.1 percent in the quarter, to about $6.6 billion.
Renault SA, No. 5 last year on sales of 1.65 million units, said one-time charges to cover losses at its Nissan Motor Co. affiliate and to pay for job cuts in France slashed net income by 60 percent from a year earlier, to the equivalent of $527 million. But operating income surged 15 percent from a year earlier as revenue increased by about $2 billion on strong sales of the Clio, Europe's best selling supermini in 1999.
Analysts said Fiat's fourth-quarter rebound, although expected, could dampen the persistent speculation that the automaker will be forced into a reluctant marriage with DaimlerChrysler AG. Despite denials from both companies, markets continue to buzz with speculation of an imminent deal.
'Fiat is certainly trying to find a solution where it's not bought out, at least in the medium term,' one unidentified analyst told Reuters. 'It needs to get into a position of strength, and the time isn't yet right.'
To that extent, he said, the fourth-quarter results were critical. 'They are what the market is watching most closely,' he said.
Analysts agreed that sales of the new-generation Punto had led the quarterly turnaround. Fiat's Europe-wide sales in January surged 29 percent over a year earlier on demand for the new supermini as its Italian market share rose to 39.1 percent from 36 percent in December and 32.7 percent in January 1999.
Renault, meanwhile, said losses at its Nissan affiliate shaved $336 million off the bottom line last year, and restructuring costs at home cost another $590 million.
But strong car sales and continuing cost cutting fueled a 15 percent gain in operating income to about $2.2 billion, it said. That yielded an operating profit margin of 5.9 percent of revenue, one of the industry's best, Renault said.
The Peugeot Group will report on Feb. 23; DaimlerChrysler AG on Feb. 28; Volkswagen AG on March 23; and BMW AG on March 28. Ford of Europe and GM Europe have already reported.