Chrysler Group reported net income of $507 million in the second quarter, with strong sales of SUVs and pickup trucks helping the car company make a profit for the eighth consecutive quarter. Earnings were up 16% from the same period a year earlier when $436 million was made. However, the company reduced its projected full year profit. Second-quarter revenues grew 7 percent to $18 billion, up from $16.8 billion in 2012.
U.S. sales were up almost 10%, bettering the industry average of 8 percent, to 479,980. All the company’s brands but Chrysler had improved sales.
“I think the (U.S.) market is holding up well and Chrysler is holding up well in that market,” CEO Sergio Marchionne told analysts Tueday morning.
Sales will be reported on Thursday and Chrysler is expected to post its 40th straight month of year to year sales gains.
The company lowered forecast of net income for the full year from $2.2 billion to somewhere between $1.7 and $2.2 billion. Modified operating profit projections were also lowered from $3.8 billion to between $3.3 and $3.8 billion.
A charge of $151 million to cover the voluntary recall of Jeep models to settle a dispute over rear end collision safety with the U.S. National Highway Traffic and Safety Administration.
For the first half of the year, U.S. sales were up 9 percent, to 908,332, gaining Chrysler 0.1% of market share to 11.6%.
CFO Richard Palmer said Chrysler was reducing its earnings expectations for the year due to the cost of the NHTSA campaign and issues with suppliers that have affected production.
“We’ve had issues at most of our plants trying to keep up with demand,” Marchionne said. “We’ve lost volumes on a steady basis,” from supply issues.
The new Jeep Cherokee’s success is considered critical by Marchionne. Several thousand assembled Cherokees have been held back from dealers as the company fine tunes the powertrain software. A second shift of Cherokee production at the Toledo North plant will begin August 19th. Jeep has also postponed the media launch of the Cherokee due to this matter, an unprecedented move by an automaker.
“The second half is not doable without a proper launch of the Cherokee. We’ve been without a car in that segment for about a year, and we’re paying a huge price for not having the Liberty,” Marchionne said.
Marchionne also said that CAFE standards will force Chrysler to develop new powertrains for its Jeep brand, hinting at diesel engines and 8 speed transmissions for Jeeps. He also reassured UAW workers that Jeeps will continue to be imported from Toledo.
“But the last thing I want to do is to ever ever stop the Toledo plant from making Wranglers,” Marchionne said, “We need to find a way to introduce the changes without stopping production in that plant.”