Though Chrysler Is Still Unprofitable, Employees Earn a $750 Bonus

Union employees at Chrysler Group will receive a $750 bonus next week as an acknowledgment of their contributions in helping to revive the once-bankrupt company, the automaker said Monday.

The amount is based on the $850 million operating profit Chrysler earned last year. The Auburn Hills, Mich.-based company reported its earnings earlier in the day Monday, showing that it actually lost $652 million in 2010 after accounting for interest and other charges.

Union workers aren't the only ones who will receive the payments, which Chrysler refers to as a "performance award," according Chrysler spokeswoman Shawn Taylor. Salaried workers, excluding the company's top 50 executives, will also receive the payment, the Detroit Free Press reported. Because of the $9 billion loaned to the automaker under the federal government's Troubles Asset Relief Program, Chrysler must still adhere to rules that restrict executive compensation.

"It was absolutely owed that we treat our people properly," CEO Sergio Marchionne told analysts and reporters on a conference call shortly after Chrysler released its earnings statement Monday. "The obligation to our people was much greater than the need to improve our bottom-line profitability."

Strong Forecast for 2011

For the fourth quarter, Chrysler reported it lost $199 million. Before factoring in interest payments and taxes, the automaker said it earned a $198 million profit. During the call, Marchionne reiterated that Chrysler would now be profitable if it weren't for the onerous interest in must pay on its debt.

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Chrysler's interest expense reached $329 million in the fourth quarter and totaled $1.23 billion for the year. Marchionne has held discussions with investment bank Goldman Sachs (GS) about ways to refinance at least some of those loans at a lower interest rate, the Free Press reported.

Marchionne also laid out expectations for Chrysler in 2011, saying the company expects to ship 2 million vehicles worldwide next year and take in revenues of $55 billion. Marchionne, who's also CEO of Italy's Fiat Group, forecast Chrysler will once again be profitable in 2011, posting net income of $200 million to $500 million for the year. The company also expects to generate $1 billion in free cash flow.

As Chrysler begins rolling out its newly revamped line of 2011 models, Marchionne said the company intends to spend, by Chrysler standards, "an exceptionally high amount of money in terms of advertising and marketing to support the launches." That's likely to boost fixed costs during the current quarter, he said.

Reachable Milestones

Although the automaker appears to put have gotten past the worse of its business woes, it still faces obstacles in returning to fiscal health, said Jesse Toprak, senior analyst at TrueCar.com, an online auto-buying guide. In addition to the high rate of interest it's paying on its debt, Chrysler also remains heavily reliant on sales of sport-utility vehicles and trucks, and it needs to initiate a dealer network in the U.S. to sell Fiat vehicles.

Despite those impediments, Toprak sees Chrysler achieving business milestones that were laid out in an agreement with the U.S. Treasury in 2009 allowing Fiat to boost its ownership of Chrysler to 51% by the end of the year "and take it public before the end of 2011."

Chrysler, along with most other automakers will report January sales figures Tuesday. TrueCar expects that Chrysler sold some 73,000 vehicles in January, a 28% increase compared to a year ago, and that its U.S. market share rose to 8.8%, up from 8.2% in January 2010.