By Nora Naughton

Fiat Chrysler Automobiles NV posted record operating profits in the third-quarter, riding a surge in demand for expensive pickups and a rebound in the U.S. auto market, where dealers are straining to keep inventories in stock.

The Italian-American auto maker reported net profit of EUR1.2 billion ($1.4 billion) for the third-quarter Wednesday, compared with a EUR179 million ($200 million) loss a year ago, as many of the company's plants resumed production this summer and buyers began returning to showrooms after widespread pandemic-related shutdowns earlier in the year.

Global operating profits of $2.7 billion, or $1.14 adjusted earnings per share, were both improvements from the third-quarter last year. The earnings results handily beat analysts' expectations of $0.44 a share.

Still, shares were down nearly 3% in morning trading, falling slightly more than the broader market.

Fiat Chrysler reinstated its full-year guidance after suspending it earlier this year due to pandemic challenges, saying it will now earn an operating profit before interest and taxes between $3.5 billion and $4.1 billion.

That's down from its earlier forecast of up to $8.2 billion for 2020 but still a sign of confidence the company can continue to improve results, barring any further virus-related complications.

"This was a remarkable quarter for our group despite the continuing effects of Covid-19," said Chief Executive Mike Manley on the company's earnings call. "While the last quarter of the year will have its own set of challenges, we believe we're going to have a strong finish to the year."

North America shined in the third-quarter, delivering the bulk of the company's operating profits and helping to offset money-losing operations in Europe and Asia, and from the troubled Maserati brand.

The better-than-expected results help give Fiat Chrysler some momentum as it presses forward on its merger with France's PSA Group, a tie-up that would create one of the world's largest auto makers.

Fiat Chrysler said the company is on track to complete the merger by the end of first quarter 2021.

The company earlier this year implemented several cost-cutting measures, including suspending its dividend payout, to help preserve cash for both the merger and to help weather the Covid-19 crisis.

Aiding Fiat Chrysler's third-quarter results was the U.S. auto market's turnaround in recent months. Demand for new vehicle has returned faster than expected leaving many auto makers scrambling to fulfill dealer orders, and U.S. auto sales grew in September for the first time since before the pandemic hit.

For Fiat Chrysler, in particular, a resurgence in truck sales in North America has helped further elevate the Ram brand, long one of its most profitable divisions.

In recent years, Ram pickup trucks have gained on chief competitors, the Chevy Silverado and Ford's F-Series trucks, by offering luxurious interiors and new tech features, such as big media displays.

Ram's truck sales now account for more than one third of the company's U.S. sales -- up from less than a quarter at the start of 2019 -- and the brand gained market share in the third quarter. Ram's strength helped drive an operating profit of $2.9 billion in North America in the third quarter.

The company's operating margin in the region was 13.8%, a record for North America.

"The ongoing success of Ram is only going to continue to add to FCA's bottom line, which will undoubtedly help product development following the company's expected merger with PSA," said Jessica Caldwell, an analyst with car-shopping website Edmunds.com.

The company said it doesn't anticipate any further disruptions from the Covid-19 pandemic in 2020. Still, inventory is constrained in North America, where its efforts to recover from a nearly two-month shutdown this spring have been complicated by it having to retool several plants for new models.

The company's troubles in Europe also endured in the third-quarter with it posting its fifth-straight quarterly loss in the region. Mr. Manley said progress was made in the past quarter as the company bids to return to profitability there.

"This bodes well for the fourth quarter," Mr. Manley told analysts.

Fiat Chrysler eked out a third-quarter operating profit of $53.9 million in Latin America -- the first time this year a region outside North America reported positive results. Asia remained a headwind, with the company posting an adjusted loss of $37.5 million.

The Maserati brand reported an $82 million operating loss.

Fiat Chrysler's revenue fell 6% to $30.3 billion in the third quarter, compared with the same period last year.

Fiat Chrysler has been pushing to improve its financial performance ahead of a planned merger with PSA. On Wednesday, the two car makers said their boards had signed an agreement on merger terms that would apply to the new company, to be called Stellantis.

The PSA and Fiat Chrysler boards also agreed to allow PSA to sell 7% of its shares in Faurecia SE before the merger is completed. PSA had previously agreed not to sell shares in the auto-parts maker until at least six months after the deal closes.

(END) Dow Jones Newswires

10-28-20 1117ET