Fiat Chrysler Automobiles on Friday posted a second-quarter loss of $1.24 billion, as North American operations contributed a small profit despite lost production due to the COVID-19 pandemic.
In the second quarter, when factories in North America and Europe were closed for weeks to reduce the spread of the coronavirus, FCA's net revenue plunged 56 percent to $13.9 billion. The automaker reported an adjusted loss of $1.1 billion before interest and taxes, compared with a profit a year earlier.
North American vehicle shipments sank 62 percent. But the company said that was "partially offset by favorable channel and model mix," so the region avoided a loss even as net revenue fell 53 percent to $9.71 billion. FCA restarted auto production in May after a two-month hiatus in the region. North America managed to report a $46.1 million profit, down 98 percent from a year earlier.
"Our second quarter showed that decisive actions and extraordinary contributions from our workforce enabled FCA to contain the impact of the COVID-19 crisis," CEO Mike Manley said in a statement. "While the company remains vigilant about the health and safety of employees, our plants are up and running, dealers are selling in showrooms and online, and we have the flexibility and financial strength to push ahead with our plans."
The turbulent second quarter comes as FCA and France's PSA Group move toward a merger to create the fourth-largest automaker in the world. The tie-up, to be named Stellantis, will combine FCA's strength in North America with PSA's solid footprint in Europe.
How well the two companies rebound from the pandemic could shape the final terms of the deal. PSA CEO Carlos Tavares told Bloomberg this week that the strength of the recovery will determine whether the combination can move ahead under terms agreed to last year.
"By the end of this year, after the rebound, we'll see what will be the potential cash position," Tavares said.
The process is stalled, though, while European regulators demand more data from the companies about their commercial van businesses. Tavares said this month that he's "flexible" about finding a solution.
FCA expects to be finish the merger process by the end of the first quarter in 2021. The company said 12 of 22 jurisdictions have signed off on the merger.
The pandemic, FCA said, “has further underlined the compelling logic.”
Net revenues in the Asia-Pacific region were down 44 percent to due to lower consolidated shipments and down 77 percent in Latin America. In Europe, the Middle East and Africa, net revenue fell 60 percent.
The critical U.S. vehicle market is still shaky. Jonathan Smoke, chief economist at Cox Automotive, said that "we are seeing the market struggle to keep up the pace of the recovery we enjoyed in May and June."
Smoke added that inventory is becoming more of a problem in both the new and used markets. Cox is expecting a modest month-over-month improvement in U.S. sales in July but said the comeback is being stifled by the coronavirus outbreak and economic uncertainty.
Shares of FCA closed Friday's trading down 3.3 percent to $10.15 in New York.
Although uncertainty around the pandemic continues to cast a shadow over the industry, FCA has to keep the product pipeline pumping. Manley confirmed production schedules in 2021 for the upcoming slate of crossovers for Jeep, which has been bolstered by the midsize Gladiator and is getting a more diverse set of powertrain options.
Manley said Jeep’s upcoming three-row crossover will go into production the first quarter of 2021. The Wagoneer and Grand Wagoneer will start production in the second quarter. The redesigned Grand Cherokee will start rolling off the assembly line in the third quarter.
He said the Wrangler plug-in hybrid will be in U.S. showrooms by the end 2020, and then Europe and China early next year. The Wrangler hybrid could be joined in the lineup at some point by a V8-powered version, which has been teased as a concept and spotted during road tests recently.
FCA has already added a diesel variant of the Wrangler and the Gladiator is in line to get the EcoDiesel engine this year.
Manley said the last few months have been an incredible learning experience for the company.
“Q2 was expected to be the worst quarter of 2020, even though we do remain cautious on the continued impacts and uncertainties as a result of the pandemic,” Manley said. “We believe the second half will be a strong finish to the year.”