Be extra careful when you read Bloomberg this morning. It will make you think you had one too many last night. The financial news service reports that Chrysler posted a $143 million operating profit in the first quarter,“after cutting costs and introducing a big pickup.” It’s a miracle alright.
However, it doesn’t mean that Chrysler is raking it in. “Operating profit” is one of those buzzwords people use to spin an income statement. Operating profit is another word for Earnings Before Interest and Taxes – and the interest alone must be gruesome. To the tune of a final net loss of $197 million in the first quarter. Still, what a change compared to the net loss of $2.69b in the last quarter of last year. Or the $3.8b net loss for the post bankruptcy period from June 10 through December 31. Which included a nearly $2.1b non-recurring charge related to retiree health care benefits, as Agence France Press points out.
Marchionne’s accountants most likely worked hard to come to that result. Max Warburton, an analyst at Bernstein Research in London said to Bloomberg: “The accounting remains opaque and current costs may not be sustainable. But it certainly makes it easier for investors to believe that with economic recovery, Chrysler is likely to make further progress.”
Not all too surprisingly, Marchionne sees it in a much rosier light: “This positive operating result in the first quarter is a concrete indication to our customers, dealers and suppliers that the 2010 targets we have set for ourselves are achievable.” Davvero!
Marchionne needs good results bad, real bad:
Good news may entice investors to buy shares when Marchionne spins off Fiat’s automotive operations.
Hitting certain milestones will help Fiat to get as much as 35 percent of Chrysler for their troubles, and for free, up from the gifted 20 percent. Currently, the U.S. owns 9.9 percent, Canada owns 2.5 percent and a UAW trust for retirees’ medical care holds 67.7 percent, bankruptcy court documents cited by Automotive News [sub] say. I can’t imagine the stockholders meetings.