Chrysler Profit Quadruples on 200, 300 Sedan Sales
Chrysler Group LLC, the automaker controlled by Fiat SpA (F), said first-quarter net income more than quadrupled as car models such as the 200 and 300 sedans helped capture the industry’s biggest U.S. market-share gain.
Profit climbed to $473 million for the three months ended March 31, from $116 million a year earlier, the Auburn Hills, Michigan-based company said today in a statement. Sales increased 25 percent to $16.4 billion as the company tapped into Detroit’s comeback with a Super Bowl television ad featuring actor and director Clint Eastwood.
Chrysler has forecast that net income will rise to about $1.5 billion this year, buoying results for its Turin, Italy- based majority owner as Europe’s debt crisis depresses sales in its home region. Chrysler’s U.S. deliveries of passenger cars surged 89 percent this year through March from a year earlier, with the 200 and 300 sedans providing the biggest gains, according to researcher Autodata Corp.
“They’ve not only done a good job on the car side, but they’re getting their financial house in order as well,” Warren Browne, a vice president at consultant AutomotiveCompass LLC, said today in a phone interview. Chrysler exceeded AutomotiveCompass’s estimate for net income of $265 million.
Chrysler reported it had $11.3 billion in cash at the end of the quarter, up from $9.6 billion as of Dec. 31. Net industrial debt fell to $1.34 billion from $2.93 billion at the end of 2011.
Chrysler will pay its 26,000 hourly employees represented by the United Auto Workers the second half of their $3,500 ratification bonuses, Jodi Tinson, a company spokeswoman, said in an e-mailed statement.
The contract, ratified Oct. 26, stipulated that the company would pay workers a second lump sum of $1,750 when the ratio of modified earnings before interest, taxes, depreciation and amortization to net interest expense was equal to or greater than 5-to-1 for four straight quarters.
Chrysler said the most recent quarter was the most profitable since 1998’s third quarter. The company didn’t report results from late 1998 to 2007, when Daimler AG (DAI) owned Chrysler, or when Cerberus Capital Management LP controlled it through mid-2009.
No IPO Plan
Sergio Marchionne, chief executive officer of both Chrysler and Fiat, plans to merge the two companies and boost sales to more than 100 billion euros ($132 billion) by 2014. Fiat boosted its ownership stake of Chrysler to 58.5 percent in January. He reiterated that the company is unlikely to do an initial public offering this year.
“We have made no decisions on the IPO,” he said on a conference call with analysts and reporters. “It’s unlikely that it’s a 2012 event if it’s an event at all.”
Chrysler also is unlikely to repay this year an unsecured note that it issued to the UAW’s retiree health-care trust when the automaker emerged from bankruptcy in June 2009, Marchionne said. The note was issued with a face value of $4.59 billion, has an implied annual interest rate of 9 percent and matures in July 2023, according to regulatory filings.
“Before we go out there and extinguish notes of that caliber, we would want to have a level of certainty about our financial capabilities, and that issue is not resolved today,” Marchionne said. “I wouldn’t count on a check going out” in 2012.
Chrysler said yesterday it will let its operating agreement with Ally Financial Inc. (ALLY) expire in April 2013 as the company negotiates with the lender as well as other banks on options for vehicle financing.
Marchionne said the structure of any potential future deal with lenders has not been decided. Chrysler has negotiated with banks including JPMorgan Chase & Co. (JPM), Wells Fargo & Co. (WFC), Santander Holdings USA Inc., General Electric Capital Corp., U.S. Bancorp and Ally, people familiar with the matter said in February.
Chrysler has told banks they can submit two bids: one to form a joint venture that covers “captive” finance business such as dealer financing, and the second for Chrysler-branded auto loans, said the people, who declined to be identified because the talks were private. Marchionne said today he doesn’t see a need for Chrysler to have a wholly owned, in-house lender.
Chrysler Group’s first-quarter U.S. sales rose 39 percent from a year earlier to 398,051 cars and light trucks, according to Woodcliff Lake, New Jersey-based Autodata. The company topped the industry’s 13 percent increase, boosted by demand for redesigned or refreshed models such as the Jeep Grand Cherokee sport-utility vehicle. Chrysler’s U.S. market share rose 2.1 percentage points to 11.5 percent, Autodata said.
Sales of the Chrysler brand’s 200 and 300 sedans more than tripled in the quarter compared with a year earlier. The 200 was featured in the previous year’s Super Bowl commercial with rapper Eminem set in Detroit. The 300 was later promoted with a Los Angeles-themed ad with rapper Dr. Dre.
Fiat reported that earnings before interest, taxes and one- time items, which it calls trading profit, surged to 866 million euros ($1.14 billion) from 251 million euros a year earlier. That beat the 828 million-euro average estimate of eight analysts surveyed by Bloomberg. Sales more than doubled to 20.2 billion euros.
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