Chrysler Strength Makes Up for Fiat Weakness

Bertel Schmitt
by Bertel Schmitt

Today, Chrysler reported its first yearly profit since 1997. It was $183 million net profit on $55 billion net revenue. Not earth shattering as car companies go, but a start: Chrysler wants to turn this into $1.5 billion of net profit in 2012 and $65 billion of revenue. At the same time, Fiat-Chrysler cut its 2012 revenue target to 75 billion, due to a slowing demand for cars in a weakening European economy. Fiat will not pay a dividend for ordinary shares in 2011.

According to Reuters, “Chrysler’s strength offset Fiat Group Automobiles (the grouping of Fiat, Lancia and Alfa Romeo brands) weakness.”

Says Michelle Krebs of Edmunds:

“Chrysler is the surprising comeback kid — again. When Chrysler emerged from bankruptcy, there were plenty of skeptics, but the automaker has proven them wrong. Since detailing its plan for the future in November 2009, Chrysler has done everything it said it would, creating an impressive recent track record and providing confidence that it will meet its 2012 goals.”

Krebs explains the math behind Chrysler’s good numbers:

“Chrysler’s incentives spend was among the lowest in the fourth quarter of any time in the past two years, and its average transaction price was the highest in at least two years (maybe ever) at $30,603. All of this as vehicle sales soared 35 percent from the 2010 fourth quarter.

Bertel Schmitt
Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

More by Bertel Schmitt

Comments
Join the conversation
10 of 25 comments
  • Hriehl1 Hriehl1 on Feb 01, 2012

    If I could walk away from all my debt and contracts, I'd turn a short-term profit too. It is all about product. Jeep is a crown jewel but its heyday has passed with low-efficiency SUVs on the wane. Ram is solid with some conquest opportunities. But the Dodge and Chrysler lines, though improved, are still industry laggards. In a relatively flat market with VW, Hyundai/Kia and Nissan on the rise, it has to come out of someone's hide. It'll be weaklings like Chrysler. How does the Dart compete with 25-year franchises like Civic, Corolla, Focus, Elantra, et al? The 200 against Camry, Accord, Malibu, Fusion, Sonata? That's a 5-year uphill battle, even if the product is totally fantastic (which it isn't, at best it is competitive). I'm not liking Chrysler's long term prospects.

    • See 5 previous
    • Hriehl1 Hriehl1 on Feb 02, 2012

      @mjz You're confusing a car's "quality" (admittedly a fuzzy term) with success in the market. There are arguably 10 models superior to a Corolla in the competitive landscape. But the Corolla outsells them all. Why is that? There is much more to market success than just bringing a good product to market; the marketplace graveyard is filled with great products. Probably 5% of the buying public read car mags or visit sites like TTAC. If the Dart is "class-leading", that 5% will know about it. Otherwise it is just another car. What is going to get the other 95% of Corolla / Civic / Focus shoppers to even walk into a Dodge dealership? Memories of the Neon? Caliber? Not so much. Huge advertising campaigns? Not so easy when Chrysler is only breaking even and Fiat is in the doldrums. Chrysler has a very long row to hoe in a landscaape where competitors have more resources and marketplace presence. Kia, Hyundai, VW and Audi are on-the-rise because they've fashioned an image as being hip. Chrysler and Dodge are perceived as old-school rental car brands. You may not like it, but it is largely true. This discussion will not resolve for years. I have a soft spot for Chrysler. But an objective look at its long-term business propsects is not a pretty picture.

  • Hriehl1 Hriehl1 on Feb 01, 2012

    At that profit rate, if your corner pizza parlor sold $1,000,000 in a year, they make $3327.27. 'Nuff said.

    • See 1 previous
    • Hriehl1 Hriehl1 on Feb 01, 2012

      @windswords Actually, Yes. The numbers don't lie. Chrysler lives in a competitive space where they're out-gunned (better product, deeper pockets) by every mainstream competitor. Spin it any way you want. When their competitors are feasting, Chrysler is merely treading water (witness their pathetic profit margin). They are demonstrably behind their competitors with nothing in sight (to my eyes) that'll make them gain significant ground. They're a Dead Man Walking.

  • MaintenanceCosts It's not a Benz or a Jag / it's a 5-0 with a rag /And I don't wanna brag / but I could never be stag
  • 3-On-The-Tree Son has a 2016 Mustang GT 5.0 and I have a 2009 C6 Corvette LS3 6spd. And on paper they are pretty close.
  • 3-On-The-Tree Same as the Land Cruiser, emissions. I have a 1985 FJ60 Land Cruiser and it’s a beast off-roading.
  • CanadaCraig I would like for this anniversary special to be a bare-bones Plain-Jane model offered in Dynasty Green and Vintage Burgundy.
  • ToolGuy Ford is good at drifting all right... 😉
Next