The company said it will retool three assembly plants in Michigan, Illinois and Ohio in 2017. "A total of $2.5 billion will be invested in these facilities to expand the Jeep and Ram brands and will bring 1,700 new jobs to these communities," the statement said. "These actions are planned to be completed by early 2018."
Debt elimination
Eliminating debt is one of the key challenges CEO Sergio Marchionne faces to fulfill an ambitious financial plan before he retires in 2019. Another obstacle is an investigation announced by U.S. regulators in December over FCA’s alleged failure to disclose emissions-violating software. The company, which has been disputing the claims, didn’t say in the statement whether it would be setting aside a provision to cover potential fines and recalls.
The company said it’s confident it can reach its aim of having at least 4 billion euros of cash by 2018 and posting adjusted earnings before interest and tax of as much as 9.8 billion euros.
“FCA this morning provided guidance which is materially ahead of the street,” Evercore ISI analyst George Galliers wrote in a note to clients.
Fiat improved its profitability across all regions, even as sector sales growth in the U.S. and Europe is slowing amid waning recoveries. In North America, its margin on adjusted earnings before interest and taxes rose to 7.4 percent in 2016 from 6.4 percent a year earlier, as earnings surged 15 percent despite flat sales.
Earnings more than doubled in Europe and Asia.
Profitability in all regions was bolstered by demand for the Maserati Levante SUV, which helped the brand more than triple its earnings in 2016 and lift the margin to 9.7 percent from 4.4 percent a year earlier.
Jeep posted a record year with over 1.4 million deliveries.
Trump ties
Despite the emissions investigation, Marchionne has been off to a good start under the new U.S. administration. His $1 billion plan to produce in the U.S. three new Jeeps and a Ram pickup now made in Mexico won plaudits from President Donald Trump as he pressures the auto industry to manufacture north of the border.
Trump, at a meeting with Marchionne and other CEOs at the White House earlier this week pledged to ease off on environmental rules and taxes and offered incentives to draw new carmaking plants to the U.S.
FCA, which has benefited from growing demand for larger cars, including its Ram pickup trucks and Jeep SUVs, stands to gain more than its peers from looser environmental regulation.
Fiat’s willingness to cooperate with Trump is “clear,” and the carmaker will continue to look at an infrastructure shift to the U.S., Marchionne said on a call with analysts. The CEO said he didn’t discuss a scrapped plan to merge with General Motors with the president, as he focuses on trimming debt and boosting earnings.
“I don’t want this house to be disturbed by anything other than the accomplishment of the 2018 plan,” said Marchionne. Still, a merger between GM and Fiat would create the world’s biggest automaker and could follow Trump’s “argument of ‘America first.'"
Marchionne said he feels comfortable about the outlook for the U.S. market for the next 24 months. He said he's willing to consider strengthening FCA's U.S. manufacturing base even further if the economic environment is conducive to do so -- including taxes, and incentives.
Reuters, Bloomberg and Philip Nussel of Automotive News contributed to this report.
