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Part shortages cut into Chrysler’s profit


MILAN/DETROIT (Reuters) - Fiat’s U.S. unit Chrysler, which generates most of the group’s net profit, cut its profit forecast as it struggled to fill orders due to parts shortages, hitting the Italian automaker’s shares.

Chrysler’s booming U.S. sales have compensated for Fiat’s losses in Europe, where demand hit a 20-year low in the first half of the year.

Fiat-Chrysler Chief Executive Sergio Marchionne said most of Chrysler’s plants had experienced parts shortages as it tried to keep up with strong demand. That resulted in lost production.

Its competitors General Motors and Ford both trounced expectations in their earnings releases last week. Automotive supply chain glitches have proven a headache for the much smaller and less diversified Chrysler, which is overly dependent on Jeep and truck models to make money.

“We’re trying to reduce the recurrence of these events, but they keep on happening at a sufficient rate that we had to look at the forecast and admit that the overall number that we had set for the year may be at risk,” Marchionne said on a conference call. “That’s why we’ve prudently taken it to the low end of the range.”

Chrysler trimmed its full-year net profit forecast to a range of between $1.7 billion and $2.2 billion from a previous estimate of $2.2 billion. It earned $1.7 billion in 2012.

Chrysler’s production rate has gone from 1 million cars a year in 2010 to 2-1/2 times that rate and the company will add another 200,000 vehicles of annual output next year, Marchionne said. That causes stress on the supplier network.

Chrysler confirmed that the critical launch of a new Jeep Cherokee was delayed by a month to September to resolve calibration issues with the SUV’s new nine-speed transmission.

Shares in Fiat, which owns 58.5 percent of Chrysler and plans eventually to merge the two carmakers, closed down 4.2 percent at 6.03 euros.

Net profit at Chrysler rose to $507 million in the second quarter from $436 million a year before. The quarter included increased pricing at Chrysler of $337 million due to the rollout of newer vehicles like the Ram pickup truck and Jeep Grand Cherokee SUV, which allows Chrysler to boost prices and cut incentives.

Marchionne said July would continue the trend of higher Chrysler sales in the U.S. market and the outlook for the rest of the year looked positive.

Marchionne said no deal was imminent regarding the company’s desire to purchase the remaining 41.5 percent of Chrysler owned by a trust affiliated with the United Auto Workers for former Chrysler workers.


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