The Associated Press January 30, 2012, 7:04AM ET

Earnings Preview: Strong 4Q expected at Chrysler

When Chrysler reports fourth-quarter and full-year earnings on Wednesday, it likely will be cause for celebration.

The company, which nearly collapsed two years ago, is expected to report its first annual net profit since 1997.

After bankruptcy and a government bailout, the company is turning itself around. It is improving its lineup of cars and trucks, and it is cutting costs. While Chrysler Group LLC lost $42 million during the first nine months of last year, those results included a $551 million second-quarter charge for refinancing government debt. The Auburn Hills, Mich., company's fourth-quarter profit is expected to erase that deficit.

WHAT TO WATCH FOR: Chrysler's fourth-quarter and full-year revenue and profits are certain to increase from 2010, when Chrysler lost $652 million. CEO Sergio Marchionne has said he expects to post a $600 million profit, excluding the refinancing charge.

Chrysler's stock isn't publicly traded and the company is majority owned by Italian carmaker Fiat SpA.

WHY IT MATTERS: Chrysler helps the U.S. economy when it hires workers. It now employs 57,200 people, 9,400 more than it did when the company left bankruptcy protection in 2009. The company's new compact car, the Dodge Dart, is being built in Belvidere, Ill.

EXPECTATIONS: Chrysler has already reported some results for the final three months of the year. U.S. sales rose nearly 36 percent to 359,703 cars and trucks. Global sales rose 22 percent for the year to 1.86 million cars and trucks. Sales in the U.S. -- Chrysler's primary market -- grew at an even faster pace of 26 percent. During the year, the company's top-selling vehicle was the Ram pickup followed by the Grand Cherokee SUV.

Its share of the U.S. market rose to 10.7 percent last year. The average vehicle sales price climbed 5.6 percent to $28,883, according to the TrueCar.com auto pricing website. When sales and prices both rise, that brings in more revenue and profit.

"They should have a good quarter," says Jim Hall, managing director of 2953 Analytics of Birmingham, Michigan. "From a profitability standpoint, they smile every time a new Grand Cherokee hits the road."

Also, the company's costs remain low because of savings from combining operations with Fiat, and because a new U.S. labor agreement keeps costs in check.

LAST YEAR: In the fourth quarter of 2010, Chrysler lost $199 million as it was trying to crank out 16 new or revamped models while paying high interest rates on loans from the U.S. and Canadian governments. The loans carried annual rates of about 12 percent. After the refinancing of $7.6 billion in government debt last May, the interest rate dropped to a range of 6 percent to 8 percent, saving Chrysler roughly $300 million a year.

Chrysler and its financing arm needed $12.5 billion from U.S. taxpayers to survive as the 2009 recession hampered auto sales and brought the company to the brink of collapse. 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.


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