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09. August 2010

Chrysler narrows quarterly loss

A year after emerging from bankruptcy protection, Chrysler Group LLC said Monday that growing car and truck sales helped it narrow its second-quarter loss to $172-million.

The U.S. and Canada are Chrysler's primary markets, and both have seen increased demand for cars and trucks since a recession-related slump last year. Chrysler said revenue rose 8.2 per cent to $10.5-billion compared with the first quarter, largely because of a 22 per cent jump in sales.

This is the first time Chrysler has reported a second-quarter operating profit since 2007, when it made $549-million while being taken over by private-equity group Cerberus Capital Management. The two quarters are tough to compare since Chrysler has been though a huge restructuring since then.

Chrysler has been run by Italian auto maker Fiat SpA since leaving bankruptcy protection in June 2009.


Chrysler got a boost in the last few months with the release of the 2011 Jeep Grand Cherokee, the first new vehicle Chrysler has released since Fiat took over. It plans more than a dozen new and refreshed products in the latter half of this year, including a revamped Chrysler 300 sedan and the U.S. debut of the Fiat 500 minicar.

Chrysler said its U.S. market share has been climbing steadily, from 8.1 per cent at the end of last year to 9.4 per cent at the end of the second quarter. Still, Chrysler's share is down from 12.9 per cent in the second quarter of 2007.

Chrysler said it expects to break even or post an operating profit this year and may raise that forecast when it reports third-quarter results. Chrysler reported an operating profit of $183-million in the second quarter, up 28 per cent from the first quarter.

“Chrysler Group is on track to achieve its goals, yet an extraordinary amount of work still lies ahead,” Chrysler CEO Sergio Marchionne said in a prepared statement.

But there is some weakness behind the numbers. According to data obtained by The Associated Press, a large percentage of Chrysler's U.S. sales are going to low-profit rental-car companies and government and commercial fleets. Chrysler was the only major auto maker to see a drop in retail sales – or non-fleet sales to individual buyers – in the first six months of the year. Retail sales rose 12 per cent on average for the industry, but Chrysler's dropped 21 per cent.

Chrysler also has a stigma, in some buyers' minds, because it accepted government bailout money. Mr. Marchionne has said Chrysler will repay $15.5-billion in aid from the U.S. and Canadian governments by 2014.

Chrysler's cross-town rival General Motors Co. may end up paying off its own government loans much faster. GM, which took $50-billion in aid, reported a first-quarter profit of $865-million and is expected to post a second-quarter profit later this week. It plans to file paperwork soon for an initial public offering that would pay off much of its government debt. Mr. Marchionne hasn't committed to any timing for a Chrysler public offering.

Chrysler's other chief U.S. rival, Ford Motor Co., didn't take government aid and recently reported a $2.6-billion quarterly profit, its fifth straight.

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