Earnings Preview: Chrysler annual profit expected
DETROIT (AP) — At Chrysler, the formula for making money has been simple: Each month, sell more cars for higher prices than you did a year ago.
That's exactly what happened last quarter, and it almost guarantees the company's second-straight annual profit.
The Auburn Hills, Mich., automaker, now majority owned by Italian automaker Fiat SpA, reports fourth-quarter and full-year earnings on Wednesday. It's also scheduled to update its five-year financial and sales plan from 2009, issued shortly after it emerged from bankruptcy protection. The plan is to include details on new vehicles.
Here's what to expect on Wednesday:
STRONG SALES: Chrysler sold more than 401,000 cars and trucks in the U.S. from October through December, up almost 12 percent from the same period a year earlier. The company gets three-quarters of its business from the U.S., so that's a good sign. When sales rise, that generally means more revenue and profit.
RISING PRICES: Chrysler is making money because it's getting better prices for its cars and trucks. In December, for instance, incentives such as rebates and low-interest financing totaled $3,206 per vehicle, down 1.3 percent from a year earlier, according to the TrueCar.com auto pricing site. Chrysler still spends more on incentives than any of the seven-biggest automakers, but the prices are improving, said Jesse Toprak, vice president of industry trends for TrueCar. "They were known to sort of give the car away, sell the deal," he said. "Now they appear to be using incentives as more optimized tools to close deals."
THE NUMBERS: Chrysler earned $1.29 billion in net profits during the first nine months of 2012. Last quarter, the company reaffirmed predictions for an annual profit of at least $1.5 billion. That means it will make at least $200 million in the fourth quarter. In 2011, the company posted a $183 million profit, its first annual net income since 1997.
THE MODELS: The sales increase has come across all of Chrysler's brands, including Chrysler, Dodge, Jeep, Ram and Fiat. Last year Chrysler brand sales rose 39 percent, led by the 300 full-size car and the 200 midsize car. Dodge sales were up almost 17 percent, led by the Avenger midsize car and Journey crossover SUV, while Jeep sales were up 13 percent on big increases from the Grand Cherokee and Wrangler SUVs. Ram pickup truck sales were up almost 20 percent.
WHY IT MATTERS: Chrysler employs 63,643 people, including more than 43,000 in the U.S. The company has hired about 17,000 workers since it left bankruptcy protection in 2009.
THE FUTURE: Chrysler still relies more on SUV and truck sales than any other automaker. Pickup truck sales should rise this year because of an aging fleet on the road, and that bodes well for Chrysler. The company aims to sell more cars, but the Dodge Dart compact, its first car jointly designed with Fiat, hasn't sold well thus far. CEO Sergio Marchionne has promised improvements to the engine and transmission. But Toprak says the company still needs strong small and midsize cars and small crossover SUVs to balance out its lineup.
The recession, which devastated auto sales, brought Chrysler to the brink of financial ruin. The company and its financing arm needed $12.5 billion from U.S. taxpayers to survive three years ago. Chrysler has repaid $11.2 billion, and the U.S. Treasury Department says it won't recover the remaining $1.3 billion.