A Fiat Chrysler Automobiles sign at the headquarters in Auburn Hills, Michigan, the US. Picture: REUTERS/REBECCA COOK
A Fiat Chrysler Automobiles sign at the headquarters in Auburn Hills, Michigan, the US. Picture: REUTERS/REBECCA COOK

Milan — Fiat Chrysler Automobiles (FCA) could halt production at a European factory because of supply problems from China due to the coronavirus outbreak there, its boss says.

The prospective closure would be the first for a European car manufacturer.

CEO Mike Manley told Thursday’s Financial Times  that four Chinese suppliers were affected by the coronavirus outbreak, including one “critical” supplier.

The Italian-US company would know within two to four weeks “whether supply will be halted for one of our European plants”, Manley said.

Financial director Richard Palmer said on Thursday that the impact of the coronavirus outbreak on the company “cannot yet be calculated”.

Japan’s Toyota and Germany’s Volkswagen have both suspended some production in China because of the coronavirus outbreak.

South Korea’s Hyundai said on Tuesday that it would stop domestic production because of a lack of Chinese parts due to the health crisis.

FCA posted a 7% rise in fourth-quarter profit on Thursday, boosted by strong business in North America and better results in Latin America as it headed into a merger with France’s PSA.

In a briefing with analysts after the results, Manley said FCA was still “firm” on its financial guidance for 2020 despite supply concerns around the  deadly coronavirus outbreak in China.

Chinese vehicle parts and assembly plants have extended previously planned Lunar New Year’s shutdowns through to February  9, and some have pushed the shutdowns even further.

FCA operates in China through a loss-making joint venture with Guangzhou Automobile Group (GAC) and has a 0.35% share of the Chinese passenger car market.

Manley said FCA plans to meet tighter emissions regulations in Europe initially with new hybrid gasoline-electric versions of several Jeep models, with plans to shift eventually to more pure electric models beyond 2025.

He said the automaker expected to meet future emissions standards without buying credits from electric carmaker Tesla after 2021 in Europe and after 2023 in the US as it introduces more hybrid models that produce lower emissions.

“Beyond 2025, full electric (vehicles) will become the norm” across the industry, Manley said, ultimately replacing hybrids which are facing future bans in several countries.

Asked about FCA’s short-term reliance on hybrids rather than pure electric vehicles to meet lower CO2 levels, he said, “We are going to be part of that solution” with future electric vehicles, but “in the most cost-effective way we possibly can”.

The Italian-American carmaker said adjusted earnings before interest and tax (ebit) rose to €2.12bn, in line with a €2.11bn forecast in a Reuters poll of analysts.

That left its adjusted operating profit for the year at €6.67bn, just shy of its target of more than €n. Its adjusted ebitda margin came in at 6.2%, in line with its target of more than 6.1%.

A trader said FCA results were “a touch above” expectations, and the carmaker’s shares in New York were up 1.3% in early trading, while shares in Milan were up 1.9%.

FCA and Peugeot maker PSA agreed in December to combine forces in a $50bn deal to create the world’s No 4 carmaker, in response to slower global demand and the mounting cost of making cleaner cars amid tighter emissions rules.

Manley said in January that talks with PSA were progressing and he hoped to complete the deal by early 2021.

AFP, Reuters

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