Earnings Preview: Chrysler 3Q profit to rise
DETROIT (AP) — Chrysler doesn't need big discounts to sell more cars — but it soon might.
Sales are up and Chrysler's prices are steady, so the company should report higher third-quarter earnings on Monday or Tuesday.
But there are reasons for concern. After a white-hot start this year, the company's U.S. sales growth has been curbed by a resurgent Honda and Toyota. The question is this: How much longer can the Detroit company win over customers without giving a little on price?
THE NUMBERS: Chrysler — which is majority owned by Italy's Fiat — sold nearly 417,000 vehicles in the U.S. from July to September. That's almost 13 percent higher than the same quarter a year earlier.
However, U.S. sales fell about 4 percent when compared with the second quarter. And Chrysler, which made $909 million in the first half of the year, is predicting earnings of less than $600 million in the second half as the global economy continues to slow.
STEADY PRICES: Chrysler, which revamped many of its models and rolled out the Dodge Dart during the summer, has managed to increase sales without raising discounts. Its average sale price in September was $29,577, up 2.3 percent from the same month a year earlier, according to TrueCar.com. Its rebates and other discounts were down 2.3 percent to $3,284 per car in September. When sales and prices rise, that generates more revenue and profit. And that almost certainly means a profit larger than the $212 million Chrysler earned in the third quarter last year.
WHY IT MATTERS: Chrysler 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 for the industry ran at an annual rate of 14.3 million through September. Chrysler's sales are up 24 percent year to date, putting it among the growth leaders. But it's fallen behind Toyota and Volkswagen, both of which grew more than 30 percent. Chrysler's growth rate is slowing, too. For example, first-quarter sales grew 39 percent from a year earlier.
In the U.S., Chrysler sells cars and trucks under the brands Jeep, Dodge, Ram, Chrysler and Fiat. It gets three-quarters of its business in the U.S.
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.