Fiat CEO confirms 2011 targets for now

RIMINI: Fiat CEO Sergio Marchionne on Wednesday confirmed its 2011 targets "for now", seeking to dispel concerns about a slowing US economy and a share slump which has nearly halved its market capitalisation.

CEO Sergio Marchionne said the stock's underperformance had nothing to do with the costs of refinancing the carmaker's big debt, which have risen in tandem with growing yields on Italian government bonds, and ruled out a capital increase.

He also said the US market was going well, but painted a bleak picture for European and Italian sales -- he said Fiat's domestic market was at its lowest since 1996.

The shares, which have lost 43 percent so far this month due to concerns about a global recession, rebounded more than 6 percent on Wednesday together with those of other European carmakers, helped by better-than-expected US economic data.

"We won't be reviewing 2011 targets until we close the third quarter. For now, we confirm the targets," Marchionne told reporters in the Italian city of Rimini.

"The stock going down has no link with the financing that we are getting," he said.

The carmaker, which owns 53.5 percent of Chrysler and has been one of Europe's top turnaround stories in recent years, has come under market scrutiny for its exposure to the US economy following a sell-off in Italian assets that began last month.

Fiat shares were the worst performer in the blue chip FTSE MIB index this month, before bouncing back this week.

BLEAK OUTLOOK IN EUROPE

Like other industrial heavyweights, Fiat has been hit by worries that a global economic slowdown would hurt its revenues.

Because of its increasing reliance on Chrysler, which it began consolidating in its results since June, Fiat is seen as particularly vulnerable to a downturn in the United States.

Disappointing sales in Brazil, Fiat's top growth market, in the first half of August also weighed on its shares last week.

Marchionne has a habit of releasing cautious targets and then beating them. Analysts said it was too early to say whether that might change in 2011, but a full-blown recession would make it difficult for Fiat to confirm or improve its guidance.

"The shares' recent fall has been too much, and in part it's not jusfified," said Mario Spreafico, head of investment at Schroders Private Banking in Italy.

"The problem is if there is a slowdown and to understand in which countries. Will those that have picked up slow down as well, above all the emerging countries?"

Another analyst, who asked not to be named, said: "What I find most interesting are his comments about the economic environment -- and clearly there are a few issues there."

Europe's number six automaker released forecast-beating second-quarter results at the end of July and is moving quickly towards a full merger with Chrysler, as a strong performance in the United States helped offset Fiat's weak sales in Europe.

In July it raised its 2011 revenue target to more than 58 billion euros ($81.70 billion) -- up from an earlier guidance of 37 billion euros which did not incorporate Chrysler -- and increased its trading profit target to around 2.1 billion euros.

"The US market continues to go well. We had already forecast that it would head towards 12.7 million cars, we never expected it to go beyond 13 million cars like others did. So for us the outlook is totally in line," Marchionne said.

He said the global economy was "very far" from a recession, but remained pessimistic about Europe.

"The European market will go down in 2011 and I don't see it doing well in 2012," Marchionne said.

Fiat shares ended 6.6 percent higher at 4.2 euros, after hitting a year low of 3.92 euros on Aug. 23. The European car sector index was up 4.7 percent.

Copyright Reuters, 2011