Chrysler Reports More Losses -- but Also Some Hope

Chrysler Group earnings
Chrysler Group earnings

Chrysler Group isn't yet profitable, but the struggling carmaker has dramatically improved its financial situation since emerging from bankruptcy last summer. The smallest of Detroit's Big Three automakers, Chrysler reported Wednesday that it lost $3.8 billion during the June-through-December period last year. But in the first three months of 2010, the Auburn Hills, Mich.-based company, now run by Italy's Fiat Group, cut losses to $197 million.

Last year's results include a $2 billion charge related to the shifting of blue-collar retiree health benefits off its books and into a trust run by the United Auto Workers union. After discounting that and other charges as well as taxes, Chrysler said it actually made a small profit last year -- $538 million, generated mostly in the fourth quarter.

%%DynaPub-Enhancement class="enhancement contentType-HTML Content fragmentId-24139 payloadId-101546 alignment-left size-small"%%"The steady progression of our financial results from June through December 2009 shows that Chrysler is on track to meet the ambitious, yet achievable goals announced in November," CEO Sergio Marchionne, who also leads Fiat, said in a statement. Further, Marchionne said, a first-quarter operating profit of $143 million, before interest and taxes, "is a concrete indication to our customers, dealers and suppliers that the 2010 targets we have set for ourselves are achievable."

Chief among those goals is Marchionne's firm prediction that Chrysler will break even after 2010's results are in and tallied. In another positive sign, Chrysler reported that it generated $1.5 billion in cash during the first quarter. Revenues for the quarter totaled $9.7 billion, compared to $9.4 billion in the fourth quarter of 2009.

Chrysler said its share of the U.S. auto market increased to 9.1% in the first quarter compared to 8.1% at the end of last year. First quarter sales rose 5% from the fourth quarter to 334,000 vehicles worldwide. Sales in the U.S. grew 5%, but lagged behind the market as a whole, which grew 15.5%.

About 40% of Chrysler's sales in the first quarter were to car-rental companies and other fleet buyers, the Associated Press reported. Such sales generally aren't as profitable as retail sales to individuals. They can also damage a model's image, since consumers come to view them as rent-a-cars. Additionally, resale values can suffer when fleet vehicles are eventually sold as used cars.

But Chrysler's biggest problem is lack of new products, with few new models in the pipeline. Aside from a new Jeep Grand Cherokee sports-utility vehicle slated to hit dealer showrooms in June and freshened versions of the Chrysler 300 and Dodge Charger sedans set to debut later this year, the company has little else to steer car buyers onto dealer lots.

Too few new models makes it harder for Chrysler to bring in revenue, according to Michelle Krebs, analyst at online car-buying guide Until new designs from Fiat arrive in showrooms next year, Krebs told the Marketplace radio program, all the company can really do is muddle through. If Chrysler can get through 2010, she said, "they might be able to survive."