Economy, Auto

Fiat-Chrysler US Profits Collapse

Fiat-Chrysler US Profits CollapseFiat-Chrysler US Profits Collapse

Fiat-Chrysler Automobiles’ US unit said third-quarter earnings tumbled 89%, as recall costs eroded profit from booming Jeep sales.

Net income declined to $70 million from $611 million a year earlier, FCA US, the parent company’s North American unit, said in a filing on Thursday.

Revenue climbed 5.3% to $21.8 billion. Earnings, excluding some items such as the recall costs, rose to $743 million from $611 million, Auto News Europe reported.

CEO 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.

Fiat-Chrysler set aside $848 million in the quarter to help pay for future recalls in North America, where US regulators assessed a $105 million penalty and ordered it to buy back vehicles.

FCA US’s modified earnings before interest, taxes, depreciation and amortization for the quarter rose 19% to $1.98 billion, according to the statement from the unit. Fiat-Chrysler sales in the US have risen for 67 straight months, in large part because of the strength of the expanding Jeep brand.

The parent company last week reported a surprise third-quarter net loss after one-time charges tied to the recall. The loss totaled €306 million ($339 million) versus net income of €174 million a year earlier, the London-based carmaker said Oct. 28 in a statement.

Analysts surveyed by Bloomberg had estimated profit would rise. Adjusted earnings before interest and taxes rose to €1.3 billion from €968 million as revenue increased 17% to €27.5 billion.