Chrysler Improves Financial Picture, Will Pay Bonuses to Workers.

by Jeff Gilbert
WWJ AutoBeat Reporter

A stronger financial picture, means "peformance awards" for Chrysler workers.

"It was absolutely owed, that we treat our people properly," said CEO Sergio Marchionne, saying that the company's workers went above and beyond the call of duty, by putting out 16 new products.  "It would have been inexcusable, not to do what we have done."

Chrysler said the bonuses for manufacturing workers would average $750.   Marchionne expects the bonuses to be paid next week. 

Chrysler posted a $199 million fourth quarter loss, bringing its full year loss to $652 million.

The company posting a core "operating profit" in the fourth quarter of $198 million, and $763 million for the full year.   But that was dragged down by high interest rates on the company's government loans. Without those loans, Chrysler says it would have earned about $800 million in 2010.

Chrysler is paying more than a billion dollars a year in interest.  Money that CEO  Marchionne says is "chewing up" any profits.

The earnings are still a significant improvement from 2009, when Chrysler had to go through a government backed bankruptcy process to simply survive.  Chrysler lost $2.7 billion in the fourth quarter of 2009.

"I think we did better than we'd originally planned, and certainly in excess of guidance,"  Marchionne told reporters and analysts during a morning conference call.  "I think the important thing is we delivered on all the key objectives that we had for 2010."

Chrysler's sales grew as the year went on, and those new products started to enter the company's showrooms. Combine that and the overall recovery, and Chrysler's sales were up about 16 per cent over 2009 levels. The new products also mean that Chrysler earned an average of two per cent more on each vehicle they sold.

"Chrysler earnings were in line with what we expected," said analyst Michelle Krebs of Edmunds.com.  "No big surprises.  Still not making money, but pretty darn close."

Among the major points that Chrysler made in its earnings report:

• Net Revenues in Q4 2010 of $10.8 billion; total year 2010 Net Revenues of $41.9 billion
• Modified Operating Profit of $198 million in Q4 2010; total year 2010 Modified Operating Profit of $763 million exceeded recently revised guidance
• Net Loss of $199 million in Q4 2010; total year Net Loss was $652 million
• Cash at December 31, 2010 was $7.3 billion, bringing total available liquidity to more than $9.6 billion; Free Cash Flow for 2010 was $1.4 billion, significantly above recently revised guidance

Chrysler expecting to sell two million vehicles next year, and forecasting a profit of between $200 and $600 million for all of 2011.  

"This is a substantial shift in terms of performance," said Marchionne.

Michelle Krebs of Edmunds.com saying the gradual sales improvement that Chrysler saw as 2010 went on, should continue through 2011.

"They are well positioned to take advantage of the edging up of car sales and take advantage of the  situation where they have some new product coming in."

The U.S. government gave Chrysler $12.5 billion to get through bankruptcy in 2009. In exchange, the government got a 10 percent stake in the company. Chrysler still owes $5.8 billion on the loans. The government hopes to get the rest back in a stock sale that could take place later this year.

CEO Sergio Marchionne says Chrysler needs two profitable quarters before its stock can be sold to the public.   But, he said that he would like to get to the point where parent firm Fiat could take a majority stake in Chrysler before the end of the year.

Chrysler's decision to pay the bonuses, was applauded by UAW President Bob King.

"We are pleased at the turnaround that Chrysler and the other domestic automakers have made," King said in a statement.  "The dedication and hard work of UAW members at Chrysler have contributed greatly to this success, and we appreciate the company's recognition of the contribution made by employees.  We are convinced that Chrysler has a great future and look forward to more opportunities for our members to share in that success."

Follow Jeff Gilbert on Twitter @jefferygilbert