Chrysler posts best quarterly profit in 13 yrs
Chrysler had its best quarterly profit in 13 years. Not bad for a company that almost died three years ago.
The company earned US$473 million in the first quarter, mainly on the back of strong US sales, which rose 39 per cent from January through March. Customers snapped up Ram pickups, Jeep Grand Cherokee SUVs and Chrysler 200 sedans.
The profit was more than four times what Chrysler made a year earlier. And it was the best performance since the third quarter of 1998 when Chrysler earned US$682 million during the pickup truck and SUV boom.
"I have no bad news to tell you," Chrysler CEO Sergio Marchionne said Thursday, adding that trends for the rest of year looked positive.
Another reason Chrysler made so much money is because it's generating more cash every time it sells a car or truck. It's getting an average of US$29,234 per vehicle in the US, up almost 5 per cent over last year, according to the TrueCar.com auto pricing website. When sales and prices both rise, that generates more revenue and profit. Revenue for the quarter rose 25 per cent to US$16.4 billion.
It's a big change from 2009. The recession, which devastated auto sales, brought the company to the brink of financial ruin.
Chrysler and its financing arm needed US$12.5 billion from US taxpayers to survive. When a government auto task force deadlocked on whether to save the collapsing company, the tie was broken by President Barack Obama.
Then things turned around. The company got the bailout, cut costs in bankruptcy and saw sales improve with the economy. It worked overtime to revamp 16 of its models in an effort to make them more appealing to consumers. The results have paid off with steady sales increases through 2011 and into 2012.
The company is optimistic about this year, repeating a forecast that it would make US$1.5 billion in 2012.
It has reason to be cheerful. Total car and truck sales in the US are running at an annual rate of 14 million so far this year. That would be a healthy increase over last year's 12.8 million. The average age of vehicles on US roads is nearing 11 years, and pent-up demand is helping sales. Chrysler should share in the growth. Last year it raised its US market share to 11.5 per cent, from 9.4 per cent a year earlier.
Chrysler also is about to launch the new Dodge Dart, its first decent compact car since the bug-eyed Neon in the mid-1990s, and a refreshed version of the Ram pickup, its top-selling vehicle, is coming later in the year.
Marchionne said the Dart takes Chrysler into a market where it hasn't had a presence in a long time.
The company, which is privately held and majority owned by Italian automaker Fiat SpA, still faces risks. The company primarily does business in North America, so its fate is tied to the US economy. Chrysler sold 523,000 vehicles globally during the quarter, but only 67,000 were outside North America. Still, international sales were up 80 per cent, the company said. Marchionne said 2012 will be the company's weakest year for new products, but he said the big year will be 2013.
Chrysler also said it added US$1.7 billion to its cash reserves during the first quarter and now has US$11.3 billion on hand.