$197M loss fails to lessen hope

April 22, 2010 at 12:00a.m.

Despite red ink, Chrysler’s first quarter marks an improvement

Staff/wire report

DETROIT

Although Chrysler Group LLC reported losses of $197 million in the first quarter, Chrysler dealerships in the Mahoning Valley are optimistic that fortunes are improving for the embattled automaker.

The red ink was far less than the staggering $3.8 billion that Chrysler lost from the time it left bankruptcy protection June 10 through the end of last year.

“I think the Chrysler dealers as a whole are feeling good about where Chrysler is,” said John Kufleitner, president of Columbiana Chrysler, Jeep and Dodge. “Sales have been very good in Columbiana and Salem, and we have been hiring new employees.”

Dealers are looking forward to a new line of products from the automaker, including the Jeep Grand Cherokee due to hit showrooms this summer, Kufleitner said.

Chrysler, now run by Italy’s Fiat Group SpA, issued financial results Wednesday.

The struggling automaker said it posted an operating profit from selling cars and trucks, before interest and taxes.

Chrysler said it generated $1.5 billion in cash during the quarter, raising its reserves to $7.4 billion and reducing the likelihood it will need more government aid. The company predicted its operations would break even or be slightly profitable this year.

The Auburn Hills, Mich., automaker said Wednesday that it made an operating profit of $143 million in the first quarter, excluding taxes and interest.

“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,” chief executive Sergio Marchionne, who also heads Fiat, said in a statement. “We are also generating cash to finance the investments being made in our product portfolio and brand repositioning.”

First-quarter revenue was $9.7 billion, up 3 percent from the fourth quarter, the company said. Revenue for the post-bankruptcy period of last year was $17.7 billion.

Chrysler said its operating loss for the last half of 2009 was $895 million.

The company also said the huge net loss for the second half of the year included a noncash charge of $2 billion as the company moved blue-collar retiree health-care liabilities off its books to a trust fund run by the United Auto Workers union.

Marchionne said the improved performance came from discipline in pricing its vehicles, a larger proportion of its sales coming from the profitable Ram pickup, and cost efficiency mainly from adopting Fiat’s manufacturing system.

But there also were signs that Chrysler could have a rough go in the future, especially in the U.S., its key home market. The company’s U.S. sales grew 5 percent for the quarter but lagged behind other automakers as the whole market grew 15.5 percent. About 40 percent of Chrysler’s sales for the period were to rental-car companies and other fleet buyers, which generally yield lower profits than retail sales to individuals.

Dealers also reported slow sales due to an aging product lineup. But Chrysler said that by the end of the year it plans to redo the slow- selling Chrysler Sebring midsize sedan and the Dodge Charger muscle car, as well as unveil a new Jeep Grand Cherokee sport- utility vehicle and a new Chrysler 300 large car. Also coming in December is the Fiat 500 minicar.