Fiat Chrysler takes earnings hit over potential costs from diesel probe

Fiat Chrysler Automobiles said Tuesday its third-quarter profits dropped nearly 40 per cent due to a one-off charge to cover possible payments in a U.S. diesel probe involving SUVs and light-duty pickups.

The Italian-American car company reported a net profit of 564 million ($842 million Cdn), compared with 910 million ($1.4 billion Cdn)in the same period last year.

The lower profits took into account a 700-million ($1-billion) charge to deal with any future settlement over alleged illegal emissions devices in 104,000 U.S.-built Ram pickups and Jeep Grand Cherokees from 2014-2016. It also covers the costs of a software update to bring the vehicles into compliance.

The U.S. Justice Department sued Fiat Chrysler in May 2017 alleging that so-called "defeat device" software in the vehicles allowed them to emit fewer pollutants in lab tests than during normal driving. In the lawsuit, the government sought civil fines that could total over $4 billion US,as well as court orders stopping the company from making or selling vehicles with undisclosed software.

Settlement talks underway

The company has denied deliberate cheating, and said the charge was not an admission of liability. Settlement talks are still under way.

Fiat Chrysler has said it would vigorously defend itself against claims and said the devices are legal to protect engines from damage.

Excluding the charge, Fiat said its adjusted earnings before interest and taxes were a record 1.99 billion ($2.9 billion Cdn), while the profit margins in North American reached 10.2 per cent, hitting double digits for the first time. The higher margins reflect the company's transition from building less profitable passenger cars to trucks and SUVs in its U.S. plants.

Overall revenues rose nineper cent, to $43 billion Cdn, on higher shipments of 1.12 million vehicles, up from just over one million last year.

North America profitable

North American profits counted for the lion's share of earnings, while Asia Pacific and Europe posted losses. The company said it saw lower sales and increased competition in China and lower sales of the Fiat brand and pricing pressure in Europe.

Worldwide combined shipments were 1,160,000 units, a three per cent rise, that the company said was mainly due to sales inNAFTA and Latin America.

Luxury carmaker Maserati also slumped 87 per cent to 15 million ($22 million Cdn) on lower volumes.

The earnings took into account higher contributions by components maker Magnetti Marelli, which Fiat Chrysler announced this month would be sold to Japanese car parts maker CK Holdings Co. Ltd for $9.3 billion Cdn. The deal is expected to close next year, with a portion of the proceeds going to an extraordinary dividend of $2.9 billion Cdn.