Fiat: €15mn per day

EBIT in line but balance sheet risks are building: Fiat reported Q3 EBIT of €880m which was 4% ahead of our forecast of €845m. Yet after burning through €1.4bn in FCF in the core business – or €15m per day - Fiat had to raise its FY12 net debt forecast to €6.5bn from €5.5-6.0bn previously, which compares to consensus estimates of only €6.0bn and CSe of €6.9bn.And how to fix it? The eagerly anticipated plan on how to deal with the automotive crisis brought little apart from the admission that losses in Europe will remain at c€700m in 2013 with breakeven not seen before 2015/16. Following on from PSA, it seems to be Fiat’s turn to try and reposition a volume car business further “up market”. And rather than closing capacity, Fiat plans to use EU plants to produce Chrysler vehicles. Once again Fiat promises a range of new models, but given experience with the 2010 plan, we remain sceptical with respect to a product-led turn around and continue to forecast earnings below 2013/14 guidance.Liquidity in Fiat’s core is now down to €7.8bn: Not only did Fiat’s core business report a negative FCF of c€1.4bn during Q3, the company repaid €1.3bn of debt maturities resulting in available gross cash falling to €7.8bn – close to our estimate of minimum required cash levels of €5bn.Little net income and large cash consumption – what’s left for shareholders?: Fiat generated net income of €39m during the quarter or €0.03 per share. Fiat now shows by far the highest level of cash consumption of any company under our coverage. Due to the law of small numbers the 2013E EPS forecast falls by 15% while the change in absolute EBIT is minimal.