Chrysler posts first operating profit after bankruptcy

Chrysler posts first operating profit after bankruptcy

DETROIT -- Chrysler Group 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 in the first quarter, up 2.7 percent from the final three months of 2009, the automaker said in a statement. Chrysler reported a net loss of $197 million in the first quarter, compared with a net loss of $2.69 billion in the final three months of last year.

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 S.p.A. obtained a 20 percent stake in Chrysler after the company reorganized in Chapter 11 with $15 billion in government support.

“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,” Sergio Marchionne, CEO of Chrysler, said in the statement. “We are also generating cash to finance the investments being made in our product portfolio and brand repositioning.”

Marchionne is also CEO of Fiat, which lost 25 million euros, down from 410 million euros a year earlier. The results of both companies were released before Fiat's day-long presentation of its 5-year plan.

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.

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. Revenue was boosted by the introduction of the Dodge Ram Heavy Duty pickup truck and “continued price discipline,” Chrysler said.

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 average 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 Autodata.

“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.

The company said it would meet its previously stated goal to break even or earn as much as $200 million on an operating basis this year. It projected 2010 revenue of $40 billion to $45 billion. Chrysler forecast 2010 earnings 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 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 UAW trust for retirees' medical care holds 67.7 percent, according to bankruptcy court documents.

Source: [Bloomberg]