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MILAN — The news of former Fiat Chrysler chief executive Sergio Marchionne's death arrived Wednesday moments before the group reported a surprisingly heavy drop in profit.

The death of one of the auto industry's most tenacious and respected CEOs overshadowed a big selloff in Fiat Chrysler shares.

FCA's scheduled second-quarter earnings presentation, led by Marchionne's successor and former lieutenant Mike Manley, began on Wednesday afternoon with a moment of silence.

As eulogies flooded in, FCA shares fell as much as 10 percent as investors digested an unexpected 35 percent fall in net profit, well below market forecasts.

Marchionne rescued Fiat and Chrysler from bankruptcy after taking the wheel of the Italian carmaker in 2004 and he multiplied Fiat's value 11 times through 14 years of canny dealmaking. He was due to step down at FCA in April next year.

"The best way to honor his memory is to build on the legacy he left us, continuing to develop the human values of responsibility and openness of which he was the most ardent champion," Chairman John Elkann added.

On Saturday, FCA named Jeep division head Mike Manley, 54, as head of the world's seventh-largest carmaker, saying the Briton would execute a strategy that Marchionne had outlined in June.

FCA has said Manley will work to ensure a "strong and independent" future for the group.

Underlining the task facing Manley, FCA cut its full-year earnings outlook after the weaker-than-expected quarterly earnings. Having to deliver the bad news four days into his new job, Manley blamed the result on a weaker performance in China, a market that represents one of new CEO's immediate headaches.

"The biggest challenges we face and frankly we're going to continue to face ... are all focused in China," Manley said.

FCA has yet to make any significant inroads in China.

In Marchionne's June plan, FCA pledged to boost production of sport utility vehicles and invest in electric and hybrid cars to double operating profit by 2022. It unveiled bold targets for Jeep, FCA's profit engine.

FCA said adjusted earnings before interest and tax (EBIT) for the April-June period fell 11 percent to 1.7 billion euros ($1.99 billion), compared with 2 billion euros in a Reuters poll of analysts.

Chinese demand slumped in the quarter ahead of a July cut in import duties, resulting in higher incentive spending and an increase in unsold vehicle stocks that "particularly affected Maserati," Manley said.

The rise in the group's inventory, from 98 days of sales to 129 for Asia Pacific, will continue to impact results as stocks are cleared ahead of new emissions regulations, Manley added.

Net revenue rose 4 percent, in line with expectations.

FCA said it expected 2018 net revenues of between 115-118 billion euros, down from a previous forecast of around 125 billion euros, while adjusted EBIT is expected at between 7.5-8.0 billion euros from at least 8.7 billion.

Reporting by Agnieszka Flak

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