Business Watch.
Fiat Chrysler Automobiles FCAU 0.35 % NV said its third-quarter profit dropped nearly 90% as charges for recalls and other costs masked the financial strength the company continues to draw from its sales of Jeep sport-utility vehicles and Ram pickup trucks in its home market.The share of first-time buyers dropped to 32 percent from 33 percent last year, according to a National Association of Realtors survey that covered transactions in the 12 months through June.A beleaguered Volkswagen employed deep discounts just to maintain flat sales in October — while the industry boomed, with a double-digit surge over last year. Rising home prices are holding back many young would-be buyers who can’t easily save for a down payment because of student-loan burdens and soaring apartment rents.
Fiat Chrysler continues to generate strong sales in the U.S. market where shoppers, bolstered by low gas prices and easy leases, are buying big, high-end vehicles. Chief Executive Officer Sergio Marchionne, after creating FCA last year from the merger of Fiat and Chrysler, is spinning off the Ferrari division to help finance the expansion of Jeep and the resurrection of Alfa Romeo.
Analysts said the month’s sales came at a tremendous cost as VW piled discounts on its cars and wrote dealers checks to help them cope with the crisis. Fiat Chrysler set aside $848 million in the quarter to help pay for future recalls in North America, where U.S. regulators assessed a record $105 million penalty and ordered it to buy back vehicles.
In mid-September, as the scandal broke, VW was already offering consumers average discounts of about $3,720 on its aging lineup of models, according to car price information company Kelley Blue Book, which had not yet tallied October discounts. FCA U.S.’s modified earnings before interest, taxes, depreciation and amortization for the quarter rose 19 percent to $1.98 billion, according to the statement from the Auburn Hills, Michigan-based unit. VW’s flat sales (actually a tiny increase, of 74 vehicles, over last year) came as the industry at large sold almost 1.5 million cars, a huge year-over-year gain that averaged 13.6%. Fiat Chrysler Automobile Chief Executive Sergio Marchionne has said the U.S. auto industry is now in a new phase whereby the government will scrutinize potential problems much more closely and push companies to issue recalls. The loss totaled 306 million euros ($339 million) versus net income of 174 million euros a year earlier, the London-based carmaker said Oct. 28 in a statement.
Emirates Airline posted a 65% year-to-year jump in first-half profit, helped by sharply lower fuel prices, as it carried more passengers despite regional unrest and increased competition. Even the once-struggling Mitsubishi joined the boom with sales soaring nearly 20% for the month. “There are really great fundamentals for sales,” said Mark Wakefield, head of the automotive practice at consulting firm AlixPartners. “Employment is rising.
The jump in earnings reflects the impact of cheaper fuel, which accounted for 28% of operating costs, compared with 38% in the first six months of last year, Emirates said. AstraZeneca AZN -1.69 % PLC upgraded its revenue and earnings outlook for the year as it reported better-than-expected third-quarter results despite tough generic competition for blockbuster heartburn pill Nexium and the effect of the strong dollar. The estimated average transaction price for light vehicles in the United States was $34,023 in October, an increase of 1.4% from October 2014 and up 0.7% from last month, Kelley said.
Core operating profit, a figure that strips out certain items such as finance expenses and one-time restructuring costs, fell just 2% to $1.73 billion as Astra cut back on administrative expenses. Astra has turned more bullish on its performance for the full year, saying revenue would be in line with 2014 at constant exchange rates, rather than declining by a low single-digit percentage, at constant exchange rates. But on Monday, the Environmental Protection Agency and California Air Resources Board alleged that other vehicles, including the diesel versions of the 2016 Audi A6 Quattro, A7 Quattro, A8, A8L and Q5 have software that fools emissions tests. Steelmaker Tata Steel Ltd. reported a 22% increase in its fiscal second-quarter profit, beating market expectations, thanks to one-time gains and lower taxes.
The German automaker said that its internal investigation into the emissions test rigging scheme discovered “irregularities” on an additional 800,000 vehicles, mostly diesel autos.