Yahoo Finance A Weak Euro Is Working to Fiat Chrysler’s Advantage
Fiat Chrysler: What Investors Should Know about This New Duo
Currency movements
Previously in this series, we looked at some possible reasons why General Motors (GM) rebuffed Fiat Chrysler Automobiles N.V.’s (FCAU) merger proposal. Now let’s see how currency movements are impacting automakers. US-based automakers like Ford Motor Company (F) and General Motors have been negatively hit by the dollar’s (UUP) strength.
In 1Q15, Ford and GM both took a major hit to their revenues as a result of adverse movements in the US dollar. Ford’s 1Q15 revenues came down ~$1.4 billion due to the dollar’s strength. For General Motors, revenues came down almost $2 billion in 1Q15.
A weak euro
In the above graph, you can see the recent movement of the euro against the US dollar. The euro has traded weakly against the greenback over the last few trading sessions. The Greek situation and the relative strength of the US economy have pushed the dollar higher. While this negatively impacts US-based automakers, companies like Fiat Chrysler and Honda Motor Company (HMC) stand to gain.
Both Honda and Fiat Chrysler receive a major part of their revenues from US markets. As we’ve already seen, almost 58% of Fiat Chrysler’s shipments are in North America. However, the reporting currency for Fiat Chrysler is the euro, since the company is based in Italy.
A weak euro will benefit Fiat Chrysler
A weak euro against the US dollar will inflate profits for Fiat Chrysler’s US operations. In 1Q15, Fiat Chrysler’s net revenue jumped 19%, largely due to the weakness of the euro. The growth in revenues was only 4% after excluding the impact of currency movements.
The euro could continue to trade weakly against the US dollar.
You can learn more about this industry by visiting Market Realist’s Autos page.
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