Fiat Chrysler's adjusted operating profit fell 29 percent in the first quarter as sales slowed in its North American profit center and in Europe. Adjusted earnings before interest and taxes totaled 1.07 billion euros ($1.19 billion) in the January-March period, the company said Friday.
Revenue fell 5 percent to 24.5 billion euros.
Fiat Chrysler maintained its guidance for 2019 earnings, saying it still expects adjusted earnings before interest and taxes above 6.7 billion euros.
Fiat Chrysler CEO Mike Manley said in a statement the market was responding "enthusiastically" to the roll out of new models and that the Italian-American carmaker would continue efforts to strengthen underperforming parts of its business.
"Based on these factors and our first quarter results being in line with our expectations, we are confident in our 2019 guidance," he said.
Operating profit margins in North America fell to 6.5 percent in the first quarter from 7.4 percent in the first three months of 2018. The company's North American margin was below the first-quarter margins generated by Detroit rivals General Motors and Ford Motor Co.
Analysts and investors have been worried about FCA's over-reliance on North America, which accounted for nearly all -- 98 percent -- of profits in the quarter while operations in Asia and Europe remain unprofitable.
"The whole quarter was powered by Ram pickups while the rest of the company was lagging," said Michelle Krebs, an analyst at Cox Automotive. "The question is whether the strong performance by Ram is going to be enough to give FCA a push moving forward."
The carmaker said it shipped 1.037 million vehicles in the first quarter, a decline of 14 percent from a year earlier.
Losses in China and Europe offset earnings from strong but slowing sales of SUVs and trucks in North America.
The company is counting on the new Jeep Gladiator pickup and heavy-duty Ram truck to boost second-half profits.
Sales are flagging amid a broader slowdown in North America, where Fiat Chrysler derived 86 percent of adjusted profit last year. U.S. deliveries slipped 3 percent in the first quarter, with only the Ram brand posting volume growth, though higher prices bolstered results.
Manley warned in February that the first half of 2019 would be weaker than a year ago because the company is no longer benefiting from selling two versions of the Jeep Wrangler -- the latest generation and a now-retired model.
In Europe, Manley said the company would return to a profit with margins of around 3 percent by the end of 2019.
FCA is in the midst of a turnaround plan in Asia, where it lost money for the fourth consecutive quarter, and vehicle shipments in China slumped 30 percent. Manley announced a restructuring of Fiat’s Chinese joint venture with Guangzhou Automobile Group Co. this week, consolidating sales operations and appointing new leadership to “more rapidly respond” to changes in the local market.
Jeep sales have been a disappointment in China, which is experiencing its first market slowdown in almost three decades. European margins have been shrinking as tightening emissions regulations force the automaker to spend more on electrification while wrestling with weaker sales.
Manley said he sees “very significant opportunities” to partner with other automakers on autonomy and electrification projects in the next two to three years. Manley told analysts Friday on a conference call he’s open to striking a deal with peers as Fiat Chrysler's European operations struggle under high labor costs at production sites in Italy and spending on electrification surges.
Manley, who succeeded Sergio Marchionne as CEO in July, a few days before Marchionne died, is already expanding collaboration on high-margin commercial vans in Europe with PSA Group. The CEO said he would “absolutely” consider using PSA’s electric-vehicle architecture as the automaker works to meet tougher emissions rules in the region. The company is exploring a partnership with PSA to collaborate on a “super platform,” Bloomberg reported in March.
“I believe the next two to three years are going to yield very significant opportunities” to partner with other automakers, Manley said Friday. “FCA will be playing an active, constructive role in how that future is defined.”
Fiat will spend $2 billion over the next three years on regulatory emissions credits to ensure it’s compliant as it rolls out a slew of new plug-in hybrid and battery electric vehicles, whose appeal to consumers is still uncertain.
Fiat Chrysler Automobiles entered into various agreements in the first quarter to secure emissions-related regulatory credits.
Chief Financial Officer Richard Palmer didn’t identify any of the companies Fiat Chrysler is buying credits from during the company’s first-quarter earnings call Friday. The automaker said last month it had reached a deal to pool its fleet with Tesla Inc. to comply with stricter European Union rules on carbon-dioxide emissions.
Without making dramatic changes to its fleet that would have hurt profit, Fiat Chrysler probably would have had to pay a fine of about 390 million euros, Manley said Friday. “The route that we’ve taken has dramatically reduced that number and we will achieve compliance,” he said.
Around the globe, automakers are increasingly required to sell a greater portion of electric and other non-polluting vehicles. If manufacturers don’t sell enough of them in jurisdictions including the U.S., European Union and China, they have to purchase credits from competitors such as Tesla to make up the difference.
Bloomberg and Reuters contributed to this report.
