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Tax benefits drive up Chrysler fourth quarter earnings

By Tom Krisher
Associated Press

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DETROIT: Chrysler and Fiat will be known as Fiat Chrysler Automobiles NV as they move forward together as a single company.

Fiat’s board of directors agreed on the new name Wednesday, with headquarters for tax purposes in the United Kingdom. But the board sidestepped the thorny political issue of whether the true headquarters would be in the United States or Italy.

The announcement came on the same day both Fiat and Chrysler announced fourth-quarter and full-year earnings. Chrysler once again propped up its parent company, which would have lost money without the U.S. automaker’s strong profits.

Shares of the combined company will trade jointly on the New York Stock Exchange and in Milan, Italy. For each share of Fiat, shareholders will get one share in the new company, which will trade with a symbol of FCA.

The new company will maintain significant research, engineering and financial operations in Fiat’s hometown of Turin, Italy, and on Chrysler’s sprawling office complex in Auburn Hills, Mich. This avoids political controversies in Italy, where Fiat is the largest private employer, and in the U.S., where the government saved Chrysler by funding its 2009 bankruptcy.

The corporate line on the headquarters location is that it’s on an airplane. Currently many of its 22-member leadership team have multiple offices in Auburn Hills, Turin and other parts of the world. Like Sergio Marchionne, CEO of both companies, they spend hours on corporate jets flying to meetings and to visit factories and other operations.

Little is expected to change in the way the company works. Already Chrysler and Fiat have joined to design three vehicles — the Dodge Dart compact, Jeep Cherokee SUV and the upcoming Chrysler 200 midsize car. All three models share engines, transmissions and other technologies developed in both places. The central location could change over time, but nothing about that was revealed Wednesday.

The changes are not a surprise and likely will not affect Chrysler dealers, said Adam Huff, co-owner of Fred Martin Superstore in Barberton. The dealership sells new Chrysler, Dodge, Ram and Jeep vehicles and also has a Fiat franchise.

“I’m glad to see them finally come together,” Huff said.

Chrysler and Fiat dealerships will continue to operate independently in the United States, Huff said. But the parent corporation now will be able to more easily exchange information and technology to make their respective products better, he said.

“It’s better for dealers and it’s better for consumers,” Huff said.

“They’re not going to be moving people wholesale,” between Michigan and Turin, said Morningstar analyst Richard Hilgert. For at least three years, the amount of time Marchionne has committed to leading the new company, “the brains are going to be flying back and forth between Auburn [Hills] and Italy,” Hilgert said.

Fiat Chrysler said it remained committed to its manufacturing base in Italy, promising “no impact on headcount.” Marchionne wants the Italian manufacturing plants to focus on higher-margin sports luxury brands Alfa Romeo and Maserati.

Chrysler, in its final earnings release as a separate company, said its net income more than quadrupled to $1.62 billion in the fourth quarter of 2013, boosted by strong U.S. sales and a $962 million one-time tax gain. Without the tax benefit, the company still earned $659 million, a 74 percent increase over a year earlier.

Chrysler’s strong quarterly and full-year performance helped to prop up Fiat, which has struggled as auto sales sputter in Europe. Fiat earned $345 million for the quarter, excluding one-time items. Without earnings from Chrysler, Fiat would have lost $321 million. That’s nearly double the loss from a year ago.

Fiat owned 58.5 percent of Chrysler last year. It has since bought the rest from a trust fund that pays health-care bills for union retirees.

Chrysler’s 10th-straight profitable quarter came because of strong U.S. sales of Ram pickups and Jeep Grand Cherokees. Chrysler’s U.S. sales, where it does 75 percent of its business, rose 9 percent last year to just over 1.8 million cars and trucks. Its average price per vehicle also rose by 2 percent in the fourth quarter to $32,309, according to Kelley Blue Book. The company sold 2.4 million vehicles worldwide for the year, also up 9 percent from a year ago.

For the full year, Chrysler earned $1.8 billion excluding tax benefits, its best performance since leaving bankruptcy in 2009.

Beacon Journal business writer Jim Mackinnon contributed to this report.


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