Chrysler Posts First Quarterly Profit

by Jeff Gilbert
WWJ AutoBeat Reporter

AUBURN HILLS (WWJ) Chrysler has posted its first profit, $116 million for the first quarter of 2011. It's pretty small by automotive standards, but the company's CEO says it reflects progress.

"We now have a clear view of a promising future," said CEO Sergio Marchionne, in an email to employees. "Our first quarter results validate the great efforts and many sacrifices you have made to help restore confidence and credibility in our company."

(Read Sergio Marchionne's email to Chrysler employees.)

Chrysler lost $197 million in the first quarter last year. With high interest rates on the company's government loans, analysts weren't sure if Chrysler would be able to make a first quarter profit, even with a 22 per cent increase in sales.

"I look at it really as a foundation they can now build upon," said J.D. Power analyst Jeff Schuster. "So, it's a good signal. Things are moving in the right direction."

Schuster says there's still a lot of uncertainty about the company's long term future.

"We haven't yet seen, really, what the joint Fiat-Chrysler product lineup is going to look like, and how consumers are going to react to that," he said.

Fiat will increase its stake in Chrysler to 46 per cent, after Chrysler pays off its government loans. Chrysler today announcing how it will raise the $7.5 billion dollars to do that.

Chrysler plans to take out a $3.5 billion dollar, six-year loan from a number of investment banks, raise $2.5 billion in new debt securities, and open a $1.5 billion dollar line of credit.

It will also get $1.3 billion from Fiat, to pay for the additional Chrysler stake.

Chrysler says it expects to earn between $200 and $500 million for the full year. While this is the first time in five years that the company is profitable, it's profit still pales in comparison to Ford, which earned $6.6 billion last year, and promises to top that this year.

General Motors is also posting earnings in the billions, with first-quarter numbers expected on Thursday.

Chrysler's Marchionne making note of the work that remains to be done, in his email to the company's workers.

"Going forward, it's important to keep in mind that there is no finish line," he wrote. "The fierce competition in the global auto industry is relentless, and we cannot afford to be satisfied with what we have accomplished to date. It's important that we remain humble and not take anything for granted."

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