We’re hardly shocked by the idea that Chrysler won’t turn profit this year. After all, Auburn Hills has barely made its minimum monthly sales volumes (at best, and with rampant incentives and fleet mix) this year, and lost $50m+ in “industrial inefficiencies” on the Jeep Grand Cherokee launch alone [Q2 results analysis here]. With plans to close out the year with a non-stop barrage of product launches and attendant media spending, it would take a minor miracle for Chrysler to break even. But we’ve essentially known this all for some time… what’s truly shocking is that Chrysler’s CEO Sergio Marchionne actually admitted to the media that Chrysler won’t turn a profit.
Ever since Marchionne rolled out his Five-Year plan for Chrysler last October [full TTAC coverage here], he’s baited his critics and insisted that Chrysler would at least break even this year. And really, he’s had little choice but to stick to his guns, as the Chrysler turnaround is predicated on the assumption of continuous sales and profit growth. And after presenting himself as an anti-incentive, anti-volume-pushing executive, the sales, incentive and fleet mix numbers coming out of Chrysler are killing Marchionne’s credibility. Which is probably why he has finally admitted that, as the DetN paraphrases
it will be “difficult” for the automaker to turn a net profit this year.
It doesn’t sound like much, especially given that top-end estimates for 2010 financial performance in the Chrysler Five Year Plan estimated a maximum profit of $200m. But by Marchionne standards, this is a big admission. Not that he doesn’t have an excuse, of course.
And it’s an excuse that we’ve seen coming ever since Bertel picked up on the first hints of whining about liquidity at Auburn Hills. At yesterday’s factory tour with Vice President Joe Biden (money quote: “you’re doing a heck of a job, Sergio”), Marchionne trotted out the old cost-of-cash argument again, telling Reuters that
Chrysler would already be showing net profits if it had not borrowed from the U.S. Treasury in order to have operating cash… “All the money given to us was debt”
We are delivering on everything we said. We are doing it quietly, keeping our head down