Earnings Preview: Chrysler 2Q profit to rise
DETROIT (AP) — When Chrysler almost collapsed three years ago, many blamed its almost total reliance on one market — the United States.
Now, with continued robust U.S. car and truck sales in the face of slowdowns in Europe, China and South America, Chrysler's over-reliance on America is a huge advantage.
Chrysler is scheduled to release second-quarter earnings on Tuesday, and if sales are any indication, the company is likely to post its biggest profit in more than 13 years. And it will come as losses in Europe drag down the earnings of crosstown rivals General Motors and Ford.
THE NUMBERS: From April through June, Chrysler sold more than 436,000 Jeep, Dodge, Ram and Chrysler cars and trucks in the U.S. It was the company's best quarter since it escaped from bankruptcy protection in June of 2009. Sales were almost 24 percent better than the second quarter of last year. That means Chrysler's profit will handily beat last year's numbers. That won't be too hard, because Chrysler lost $370 million last year after refinancing bailout debts to the U.S. and Canadian governments. The Auburn Hills, Mich., automaker, privately held and majority owned by Italy's Fiat SpA, also should do better than it did in the first quarter, when it made $473 million, its best showing since the third quarter of 1998.
Chrysler's market share rose 1.4 percentage points from the first half of 2011 to the first half of this year.
STEADY PRICES: Chrysler, riding a wave of revamped models, has raised sales without increasing incentives. Its average sale price through June is $29,939, slightly higher than a year earlier, says the Edmunds.com auto website. The company cut spending on rebates and other discounts by almost 6 percent between July of 2011 and this month, TrueCar.com says. When sales and prices both rise, that generates more revenue and profit.
WHY IT MATTERS: Chrysler helps the U.S. economy. It employs 62,200 people, including more than 41,000 in the U.S. The company has hired 12,000 workers since it left bankruptcy protection in 2009.
EXPECTATIONS: Total U.S. auto sales ran at an annual rate of 14.3 million through June, and many analysts say that even if things slow down a little, the U.S. will end the year over 14 million. Chrysler, along with Volkswagen, has led all major automakers so far this year with sales gains of more than 30 percent. So Chrysler should have a good year. In 2011, when the company made $183 million, auto sales in the U.S. totaled only 12.8 million. This year the company will prop up its Italian owner, which is struggling with lower sales in Europe.
A bit of caution is in order: Chrysler's growth rate is slowing. Its first-quarter sales grew 39 percent over a year earlier. Second quarter sales rose 24 percent.
Chrysler and its financing arm needed $12.5 billion from U.S. taxpayers to survive three years ago. The recession, which devastated auto sales, brought the company to the brink of financial ruin. Of the original Chrysler bailout, $11.2 billion has been repaid. The U.S. Treasury Department says it won't recover the remaining $1.3 billion.