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Chrysler Group LLC, the automaker controlled by Fiat SpA (F), reported second-quarter net income of $436 million as the company plans to extend gains in passenger- car sales with the new Dodge Dart compact.
The quarterly profit compared with a year-earlier loss of $370 million, the Auburn Hills, Michigan-based company said yesterday in a statement. Chrysler’s second-quarter 2011 results included a one-time $551 million cost for repaying government loans. Sales increased 23 percent to $16.8 billion.
Chrysler affirmed its forecast that net income will rise to about $1.5 billion this year, buoying results for its Turin, Italy-based majority owner as Europe’s debt crisis sends sales in the region to a fifth-consecutive drop. Chrysler’s U.S. sales of passenger cars surged 42 percent during the second quarter from a year earlier, driven by demand for 200 and 300 sedans, according to researcher Autodata Corp.
“Chrysler really has hit the ball out of the park here in the first half, gaining additional market share in the U.S.,” Richard Hilgert, an analyst for Morningstar Equity Research, said in a telephone interview before the results were released.
The results “could mean potential upside” for Fiat’s earnings, Hilgert, who is based in Chicago, said in an e-mail after Chrysler’s statement.
The Italian automaker may say that earnings before interest, taxes and one-time items, which it calls trading profit, surged 82 percent to 957.8 million euros ($1.17 billion) for the second quarter, the average estimate of four analysts surveyed by Bloomberg.
Fiat shares traded down 6 cents, or 1.3 percent, to 4.13 euros as of 12:28 p.m. in Milan today, ahead of the carmaker’s earnings release later this afternoon. The shares have climbed 16 percent this year.
“When Fiat reports its numbers, we will see how better cash generation at Chrysler will translate into the group net debt figure,” said Erich Hauser, an analyst with Credit Suisse in London. Chrysler results were below his estimates, he said.
Chrysler reported it had $12.1 billion in cash at the end of the quarter, up from $11.3 billion as of March 31. Net industrial debt dropped to $432 million from $1.3 billion at the end of the first quarter.
Chrysler’s car sales gains probably will continue in the second half because of the Dart, which will reach full inventory at dealers by September, Hilgert said.
“Our portfolio became more balanced with our car mix increasing on a year-over-year basis, showing that our car offerings are becoming more competitive,” Sergio Marchionne, chief executive officer of Chrysler and Fiat, said in an e-mail to employees. “We are building on this trend, as the all-new Dodge Dart began arriving at dealerships during the second quarter.”
Marchionne plans to merge the two companies and increase sales to more than 100 billion euros by 2014. Fiat will boost its ownership stake of Chrysler to 61.8 percent by exercising an option to buy an additional 3.3 percent from the United Auto Workers’ retiree health-care trust, or VEBA, the company said in a July 3 statement.
An initial public offering for Chrysler is unlikely to be a 2012 event, “if it’s an event at all,” Marchionne said on an April 26 conference call. The slump in financial markets and valuations of competing automakers make it unlikely that Fiat and the VEBA, which owns the remainder of Chrysler, will reach an agreement clearing the way for a full merger of the automakers in the near term, Morningstar’s Hilgert said.
“With the markets being where they are at this point and auto stocks not really being at the valuations that we saw maybe a year and a half ago or so, the two probably aren’t going to meet at this point in terms of valuation,” he said.
Chrysler Group’s total U.S. sales rose 30 percent from a year earlier to 834,068 cars and light trucks during the first half, according to Woodcliff Lake, New Jersey-based Autodata. Sales of the Chrysler brand’s 200 more than doubled and 300 sedans almost tripled in the first half from a year earlier.
The company topped the industry’s 15 percent increase, boosted by demand for redesigned or refreshed models such as the Jeep Grand Cherokee sport-utility vehicle. Chrysler’s U.S. market share rose 1.4 percentage points from a year earlier to 11.5 percent, Autodata said.
Fiat’s first-quarter operating losses in Europe almost doubled to 207 million euros. Marchionne said this month that the company will shut another plant in Italy after closing one in Sicily last year unless it can come up with a viable plan to use excess capacity to build cars for North America. Fiat has delayed the introduction of new models in Europe and is cutting investment in the region by 500 million euros.
Chrysler probably will continue to offset slumping results for Fiat “at least through 2013” because of Europe’s market conditions and Italy’s austerity measures, Hilgert said.
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