Written by admin on August 10th, 2009
The Possibility Of Fiat’s Escape From Debt
Making headlines is the prospect that Italian automaker, Fiat—recently gaining broad attention in the U.S. for its purchase of Chrysler—will resume profitability and make its escape from deb. Market watchers are keeping an eye on how the company will progress in its quest to reduce its debt load.
According to some analysts, the carmaker could post a net profit between $44 million and $57 million. This estimate comes despite a net loss of almost $156 million.
The real decisive issue for Fiat is debt, a factor that has determined the company’s recent behavior. If the debt reduction efforts do not meet the consensus expectations of the markets, there is a good chance that the shares will fall. Of course, if the reduction goes better than expected, the stock may have a better recovery rate.
Fiat’s debt rose to $9.4 billion at the end of March from $8.4 at the end of 2008. The consensus estimates suggest that the carmaker may have the opportunity to reduce the debt an additional $924 million to $8.5 billion. (It may be possible for debt to fall a further $1.6 billion to a total of $7.7 billion.
MedioBanca analyst Massimo Vechio expects Fiat to post a $57 million quarterly net profit. At the same time, opinion is divided on how the carmaker will perform during the second quarter.
A number of other industry leaders are voicing their varying outlooks for the Italian carmaker. Citigroup has made predictions that Fiat will “lighten the gloom” in the industry.
On the other hand, JP Morgan Chase has told investors to expect negative surprises from Fiat. “We think investors will increasingly focus on 2010, when the post-[scrapping] hangover is likely to result in a volume decline in Western Europe.”
Again, one of the biggest focuses for positive growth may come from the carmaker’s acquisition of a controlling interest in Chrysler. Analysts are waiting to see what Fiat CEO Sergio Marchionne has in mind.
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Tags: fiat car company, fiat debt
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