Chrysler Turns a Profit

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  1. TriShield

    TriShield Super Moderator® Staff Member

    Jul 6, 2001
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    Chrysler Posts ‘Impressive’ Profit on Lower Costs


    By Keith Naughton and Sara Forden

    April 21 (Bloomberg) -- Chrysler Group LLC, the U.S. automaker run by Fiat SpA, said it posted a $143 million operating profit in the first three months of the year after cutting costs and introducing a big pickup.

    Revenue rose to $9.69 billion (7.21 billion euros) in the first quarter, up 2.7 percent from the final three months of 2009, the Auburn Hills, Michigan-based automaker said in a statement. Chrysler reported a net loss of $197 million, compared with a net loss of $2.69 billion in prior quarter.

    After emerging from bankruptcy June 10 through the end of 2009, Chrysler said it lost $3.8 billion on revenue of $17.7 billion. Fiat obtained a 20 percent stake in Chrysler after the company reorganized in Chapter 11 with $15 billion in government support. Fiat and Chrysler Chief Executive Officer Sergio Marchionne today reiterated the U.S. automaker will break even or earn as much as $200 million on an operating basis this year.

    “Reports of our demise have been greatly exaggerated,” Ronald Thompson, a Chrysler director, told reporters today in Turin, Italy. “The last four to five years have been very traumatic for Chrysler. To have a leader come in who obviously understands the global automotive industry and has a track record of turnarounds in difficult environments is very important.”

    Added Cash

    Chrysler said its cash rose to $7.37 billion on March 31, from $5.88 billion at the end of last year. It can still draw on $2.4 billion in funding from U.S. and Canadian taxpayers, giving the automaker total available liquidity of $9.8 billion. The company reported total financial liabilities of $13 billion.

    “It’s an impressive result and shows how much cost was taken out by Chapter 11 and Fiat’s actions,” said Max Warburton, an analyst at Bernstein Research in London. “The accounting remains opaque and current costs may not be sustainable. But it certainly makes it easier for investors to believe that with economic recovery, Chrysler is likely to make further progress.”

    Chrysler said revenue was boosted in the first quarter by the introduction of the Dodge Ram Heavy Duty pickup truck and “continued price discipline.” “This positive operating result in the first quarter is a concrete indication to our customers, dealers and suppliers that the 2010 targets we have set for ourselves are achievable,” Marchionne said in a statement. “We are also generating cash to finance the investments being made in our product portfolio and brand repositioning.”

    Fiat Loss

    Marchionne also said Fiat lost 25 million euros in the first quarter, down from 410 million euros a year earlier. The company’s shares fell 4 cents to $10.38 euros in Milan.

    Chrysler said its worldwide vehicle sales rose to 334,000 cars and trucks in the first quarter, from 318,000 in the fourth quarter of last year.

    Sales of Chrysler Group vehicles in the U.S. fell 5.3 percent in the first quarter while industry deliveries rose 16 percent as Marchionne slashed discounts to consumers, according to researcher Autodata Corp.

    Marchionne has said he opposes incentives to prop up market share at the expense of profits. He pared discounts for Chrysler, Dodge and Jeep brand vehicles by $1,122 in the first quarter, more than quadrupling General Motors Co.’s $230 cut and Ford Motor Co.’s $214 reduction, according to Woodcliff Lake, New Jersey-based Autodata.

    New Products

    “We are confident that Chrysler sales will continue to increase as we launch new products in the second quarter, beginning with the all-new 2011 Jeep Grand Cherokee,” Marchionne said in the statement.

    The company has projected 2010 revenue of $40 billion to $45 billion. Chrysler forecast earnings for the year of $2.5 billion to $2.7 billion before taking into account interest, taxes, depreciation and amortization.

    Making Chrysler profitable will help Marchionne offer shares to the public and ultimately spin off Fiat’s automotive operations from the company’s divisions that make trucks and tractors.

    Marchionne has said he expects to increase Fiat’s stake in Chrysler by 5 percent this year when it meets a target to introduce its 500 small car in the U.S. The Italian company agreed to share technology, systems and management with Chrysler in exchange for the initial stake, for which Fiat paid no cash.

    Fiat can obtain as much as 35 percent of Chrysler. The U.S. has about 9.9 percent, Canada owns 2.5 percent and a United Auto Workers trust for retirees’ medical care holds 67.7 percent, according to bankruptcy court documents.


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