Chrysler first-quarter profit tanks
Chrysler Group reported a 65 percent drop in first-quarter profit Monday, citing the cost of new product launches and weaker sales in Europe and Latin America.
"The best way to look at this is a one-time event. Just close your eyes, plug your nose and move on," said Sergio Marchionne, chief executive officer of Chrysler and its Italian partner Fiat.
The bulk of the profit drop came from reduced shipments as Chrysler ceased production of the Jeep Liberty and retooled its plants to build the refreshed Jeep Cherokee, Grand Cherokee and Dodge Ram pickup truck, Marchionne said.
Chrysler, which came under Fiat's control after emerging from a government-backed bankruptcy in 2009, has also been investing heavily in upgrading its long-neglected assembly plants.
"We were hoping, to be honest, we'd do somewhat better than this," Marchionne said in a conference call.
"The only thing I find truly encouraging is we were still a consistent cash producer."
Chrysler posted net income of $166 million for the first three months of the year, down from $473 million in the year-earlier period. Net revenue fell 6.0 percent, to $15.4 billion.
The third largest US automaker said it was still "on target" to meet its full-year net earnings target of $2.2 billion dollars, on revenue of $72-75 billion and worldwide shipments of 2.6 to 2.7 million vehicles.
"We recognize the amount of pressure that's in the system to deliver our remaining operating profit is large," Marchionne said.
Strong US sales in April show that the market conditions are right for a great second quarter, provided that Chrysler doesn't fumble the launches of its new vehicles, Marchionne said.
"Really the onus is on us, it's a question of really being able to execute. If we fail it's our fault. It's not the market, it's not the competition. It's us," he said.
Marchionne is also focused on acquiring the remaining 41 percent stake in Chrysler. He said Fiat is keeping plenty of extra cash on hand so it can close the transaction "in short order" once a deal is reached.
Fiat is currently in talks with the retiree health care trust fund -- or VEBA -- which holds the remaining stake in Chrysler. The VEBA has asked for an initial public stock offering and has also sought relief from the courts in hopes of maximizing what Fiat has to pay for its stake.
"I remain hopeful that we'll find a solution with VEBA that meets their objections and ours," Marchionne said.
"We need to find a way to reconcile their expectations of value ... if they are realistic, then I think Fiat is quite willing to make the effort to try to close it up."
In the meantime, Fiat plans to exercise the remaining options which will allow it to obtain a further 16 percent stake in Chrysler in the next 30 months, Marchionne said.
Results in the January-March period were also negatively affected by "continued economic weakness in Europe and import restrictions in Latin America," the company said in a statement.
Worldwide vehicle shipments fell 5.0 percent to 574,000 units in the first quarter, due mainly to the end of Liberty production, the company said.
But sales worldwide were up 8.0 percent from a year ago, to 563,000 units, led by a 12 percent jump in the United States.