Chrysler is struggling with weaning itself off profit sapping incentives while it attempts to peddle an aging product line.
Taxpayer owners in Canada and the U.S. of Chrysler Group received mixed news this morning as the reorganized company posted an operating profit of $143 million during the first three months of 2010, but also posted a large loss for 2009.
Chrysler, managed by 20%-owner Fiat SpA, attributed the positive development to reduced costs, as well as revenue from the newly introduced Ram heavy-duty pickup truck.
Revenue rose to $9.7 billion in the first quarter, plus 2.7% from the final three months of 2009, Chrysler said in a statement.
Chrysler reported a net loss of $197 million in the first quarter, compared to a net loss of $2.69 billion in the final three months of last year.
“This positive operating result in the first quarter is a concrete indication to our customers, dealers and suppliers that the 2010 targets we have set for ourselves are achievable,†said Sergio Marchionne, Chief Executive, Officer, Chrysler Group LLC, who also has his hands full as head of loss making Fiat. (€21 million loss vs. €411 million loss for Q1 2009.)
Chrysler said it lost $3.8 billion on revenue of $17.7 billion after its emergence from bankruptcy last June 10 and through the end of 2009. This staggering number includes $1.4 billion in so-called goodwill, which is posted on the positive side of the ledger, one of those intangible calls by accountants.
It was during the reorganization that Fiat was granted its 20% ownership for a paltry $320 million assigned to its intellectual property in a controversial transaction that saw $15 billion in government support. As a result, Canadian taxpayers now own 2.46% of Chrysler Group. U.S. taxpayers hold 9.85%.
Fiat has the option to increase its stake contingent on government loads being repaid and the introduction of small car technology, among other terms.
Sales remain problematic at the still struggling automaker
Worldwide vehicle shipments in Q1 were 380,000, which included U.S. vehicle shipments of 268,000, both figures representing an increase of 3% versus Q4 2009. Chrysler Group vehicle sales in the U.S. dropped 5.3% even though industry sale rose 16% during the first quarter. Market share improved to 9.1% from 8.1% Q4 2009, and to 13.7% Canada from 11.6% percent in Q4 2009.
Chrysler is struggling with weaning itself off profit sapping incentives while it attempts to peddle an aging product line. Jeep, Dodge and Chrysler minivans, and Ram trucks remain competitive, but it is tough to consider Chrysler a full-line maker based on the performance of its other models.
Chrysler reconfirmed its targets for the year, including a minimum of operating break-even in 2010. These targets, announced on November 4, 2009, are:
- Net Revenues of $40-45 billion
- Operating Profit of $0.0-0.2 billion
- Modified EBITDA of $2.5-2.7 billion
- Negative Free Cash Flow of $1.0 billion