BusinessWeek Logo

Marchionne speaks: Chrysler's financial woes are overblown.

Posted by: David Welch on November 04

Contrary to popular view, Chrysler isn’t flat broke. That was the first thing Fiat CEO Sergio Marchionne said when kicking off a six-hour presentation that seeks to convince the world that the Italians have a plan to bring Chrysler back from the brink. The company has $5.7 billion in cash and has actually grown its cash hoard by $1.7 billion since exiting from bankruptcy in June, Marchionne said.

And get this. Chrysler made $200 million in profit since emerging from bankruptcy in June. Well, let’s qualify that. The company made $200 million in EBITDA, which is earnings before interest, taxes, depreciation and amortization. That is to say, they made money before counting a lot of things that cost the company money. So Chrysler still lost money since June.

But Marchionne did say that Chrysler broke even in September. One month’s profit is practically meaningless in the car business. Put off some major spending on a future vehicle program for a month and you can make any month look good. Marchionne said Chrysler did it by being very parsimonious. His point is that Chrysler’s financial position is not as hopeless as many outsiders think.

Given the debt reduction and cost cuts made during bankruptcy, Chrysler’s financial position is probably not as dire as everyone thinks. But its sales are. Chrysler sales are off 39% this year. The company said it has a slew of new models coming from its joint engineering projects with controlling partner Fiat, but stopping that drop off in sales will be very difficult. If it gets worse, Marchionne will have to slash deeper for Chrysler to make it.

TrackBack URL for this entry: http://blogs.businessweek.com/mt/mt-tb.cgi/

Reader Comments

Ballbuster

November 5, 2009 04:23 AM

Talking like an unscrupluous used car salesman, Marchionne claims Chrysler made a profit and with $5billion cash in the cookie jar it is financially solvent. As the CEO of Fiat-Chrysler who habitually makes such dubious statements, Marchionne gives additional proof that the acronym, CEO, stands for criminal executive officer. Apparently, he believes Americans have forgotten about the $8billion taxpayer gift to Chrysler on the eve of its bankruptcy as well as other tax benefits granted to Chrysler. His arrogant statement is worthy of that old and time honored Italian salute using an elbow and fist. The American consumer is eagerly awaiting the second opportunity to launch Fiat and its CEO out of USA with a swift kick in the gluteus maximus.

Sergio

November 9, 2009 01:45 PM

Dear Ballbuster, amazing how well you think of italians.
You should rethink you position. Italians were one of the key imigrant waves that helped to develop America and it's economy, and that also are paying ( and complaining about ) the same taxes...
You are absolutely right about the absurdity of the use of tax payers money to save the private sector, but just try to use better arguments...

Ballbuster

November 10, 2009 02:55 AM

Dear Sergio, my post is an attack on Marchionne who is a private Italian citizen and a corporate officer of an Italian corporation. Marchionne is not a representative of the Italian people or the Italian government. He never claimed to represent all the Italian people. He is neither an immigrant to America nor an American citizen living in America as part of the American experience. Therefore, an attack on Marchionne is not an attack on all Italians. You should reread my post. I thank you for your supporting my position on bailouts.

Post a comment

 

About

Want the straight scoop on the auto industry? Detroit bureau chief David Welch and auto beat veterans David Kiley, Dexter Roberts and Ian Rowley bring daily scoop, keen observations and provocative perspective on the auto business from around the globe. Read their take on such weighty issues as Detroit’s attempt at a comeback, Toyota’s quest for dominance and the search for an efficient car.

RSS Feed: Auto Beat

BW Mall - Sponsored Links