Chrysler Narrows Its 2nd Quarter Loss
The new Fiat-run Chrysler is doing better, but it's not making money yet. However, it could soon be adding more jobs.
Chrysler lost $172 million in the second quarter, a better performance than the first quarter, when they lost $197 million.
CEO Sergio Marchionni calls it a continuation of efforts that began last year, but are now starting to bear fruit.
"If all the funds that had come in from (the government) had been received in equity, as our other friend in town has done, we would have actually been able to post a profit for the quarter," said Marchionni during a conference call with reporters.
Marchionni says the 2011 Jeep Grand Cherokee is off to a good start. Chrysler is also starting to build a new Dodge crossover vehicle at that plant. Chrysler says they are now considering adding a third shift at that plant. A second shift just started working in July.
Chrysler did post its second consecutive operating profit, $183 million for the second quarter. Marchionni said that's important, because analysts will look at that track record when Chrysler begins it's public stock sale, likely in 2011.
Analysts say Chrysler has been able to keep costs under control, as it waits for new products to hit the market.
"Through the bankruptcy process, they were able to shave a tremendous amount of cost and overhead," says Mike Robinet, who's an analyst with IHS Automotive. "That's allowed them to bring their break even level down tremendously. This is really helpful in a down market."
In the past year, Marchionni and his team have cut costs and overhauled Chrysler's product development program.
"Sergio has really brought a sense of clarity to the organization," said Robinet. "Before, there was a real lack of leadership with respect to where the product porfolio was going, and where they were going in terms of technology."
Chrysler says it remains on track to break even or post an operating profit this year and will almost certainly raise that forecast when it reports third-quarter results. Marchionni says it appears Chrysler's turnaround is ahead of schedule.
The U.S. and Canada are Chrysler's primary markets, and both have seen more demand for cars and trucks since a recession-related slump last year. Chrysler says revenues rose 8.2 percent to $10.5 billion compared with the first quarter, largely because of a 22 percent jump in sales.
But many analysts say with an older product lineup, Chrysler's retail sales at dealerships actually declined in the second quarter.
"The general consensus is they are doing a lot of fleet business," said Rebecca Lindland, also an analyst with IHS Automotive "Which isn't necesarily bad, because there is a lot of pent up fleet demand."
Fleet sales tend to be less profitable than retail sales. But, the Chrysler CEO said all automakers depend on fleet sales to one degree or another.
"There's nothing dirty about fleet," he said. "These are good customers who pay cash for the products that they buy."
Analysts like Lindland say Chrysler's operating profit is an indication that they are poised to post significant earnings when they get their product portfolio in order.
"If they can make money right now, then just wait until they get some new product in the showroom."
Chrysler's CEO says that new product is starting to flow, starting with the new Grand Cherokee, and more products coming in the final months of the year, including new mid-size cars, and significanly upgraded minivans.
Chrysler is also re-doing it's Chrysler 300 and Dodge Charger big cars, and freshening several Jeep products.
"We're looking at a significant product revamp in Q3 and Q4 of 2010 all of which is supposed to lay the groundwork for a significant increase in performance in 2011," said Marchionni.
Marchionni said Chrysler still has a lot of work ahead of it, but said the company was up to the challenge.
"We may be the smallest of the big three in Detroit, but we're not the dummest."
WWJ AutoBeat Reporter Jeff Gilbert contributed to this story.
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