Profits at Last! Chrysler Finally Makes Some Money; Now the Hard Part Begins

No one was really surprised that Chrysler posted a quarterly profit -- a modest $116 million -- this year, technically its first since exiting bankruptcy in 2009, but really the first time it's been in the black since the mid-2000s when it broke up with Daimler-Benz. Fiat-Chrysler CEO Sergio Marchionne has seen his master plan to revive Chrysler vindicated, but he's not out of the woods yet. Here's a scorecard of Marchionne's wins and losses so far:

WINS

No more doubts about Fiat. Marchionne has done what Dieter Zetsche and Cerberus Capital Management couldn't do with Chrysler: put some wind in the company's sails. Okay, so he got plenty of help from the U.S. government and the bankruptcy courts. Still, he's skillfully executed his plan to revive Chrysler and bring Fiat back to the U.S. market. Recently, he refinanced Chrysler out of loans to the U.S. and Canada that carried onerous interest rates. Next up, acquiring a majority stake and staging an IPO, most likely run by Goldman Sachs.
Sustaining Jeep. Chrysler's best brand is Jeep, and Marchionne knows it. As such, his emphasis on Jeep redesigns last year has paid off in media goodwill -- and sales. He could have (foolishly) pressed harder on sedans or pickup trucks, but he grasped that Chrysler needed to lead with it best product.
Getting the Fiat 500 to the U.S. in time for a summer gas spike. Fiat is now selling its plucky, peppy BMW MINI killer in the U.S. With prices at the pump expected to escalate this summer beyond their already $4-a-gallon levels (for regular-octane juice), the timing couldn't be better.

LOSSES

Everything else Chrysler sells -- except minivans. Chrysler invented the minivan and still does very well there, and the company should do better as both Toyota (TM) and Honda, its main competitors, struggle to overcome the effects of the earthquake disaster. Other segments look, well, rougher. The sedans are stylish, but they're going up against superior cars from Chevy, Ford (F), and even the upstart Koreans. There's always hope in pickups, but the Ram brand is a perennial number three to Ford's F-150 and Chevy's Silverado. Nevertheless, Chrysler is highly reliant on Ram sales.
Foreign markets. Of the (former?) Big Three, Chrysler has the least exposure to booming growth in the developing world. Against GM's robust Chinese business, all Chrysler can offer is -- yep -- Jeep imports. The Fiat tie-up could kinda, sorta change this -- Fiat is well-established in Latin America -- but Chrysler's future is all about North America. Where it has far less market share than its Motown rivals and Japan's Big Two. And no market is more difficult to gain share in than the USA.
Fleet sales. As USA Today reports, Marchionne wants to get Chrysler off discounted sales to rental and corporate fleets. This sounds great at first read -- until you remember that's where much of the product that regular consumers don't want is going. There's nothing wrong with fleet sales if they help you to get rid of dowdy cars and keep the assembly lines in business until something better comes along.

On balance, Chrysler's first-quarter profit has to greeted with qualified rejoicing. It obviously could have been so, so much worse. The company's return from near-death has been a quasi-miraculous thing to observe. But now that it's officially off life support, it going to need some seriously physical therapy. And for that, it's going to need to make a lot more money.

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Photo: Chrysler Media

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