Chrysler Predicts Profitability By 2011
Laugh, said an anonymous sage, and the world laughs with you. The corollary to which apparently, is “make unrealistic predictions of your own success and the world laughs at you.” Fiat CEO Sergio Marchionne is finding this out the hard way, having predicted in a Globe and Mail interview that his Auburn Hills-based bailout baby will be making money “in the next 24 months.” And how, pray, does Marchionne expect to achieve the impossible? Marchionne insists his goal is achievable “because we have decided not to flog inventory, because we’re disciplined about production, because we’re going to try not to discount the vehicles. If [discounts are] the only way I can sell them, I’d prefer not to produce them because I’m not making any money.” But is there some other way of selling Chryslers?
Recent sales numbers don’t seem to suggest so, and Marchionne can only turn down cash flow for so long. Or, to be more precise, Fiat’s predicted $1.56b profit has to be used to pay down Fiat’s extensive debts before it can be used to prop Chrysler up. Besides, Marchionne insists that “[Chrysler] doesn’t need it,” because they’re “managing their resources well.” But with inventories low, production will have to ramp up again. Which costs money, and if Chrysler won’t fire-sale its weak products, Marchionne will be changing his tune soon. Meanwhile, if profitability does return, an initial stock offering will only benefit one body: the UAW’s VEBA fund. “VEBA needs to monetize that interest,” explains Marchionne. “That was the deal. We owe it to them.”
More by Edward Niedermeyer
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That loyal 5-6% market share floor is aging and not being replaced. I'm 40 and from Michigan, and I don't know anyone who is Chrysler-loyal - maybe there's a cousin who has a soft preference for RAM. Some are loyal to the general idea of buying American, but they tend to be Ford or GM people. That's at my age...today's 18 year olds? They are not buying Chrysler. My dear old 68-year-old aunt still thinks of her Chrysler Sebring as a premium vehicle ("would you like to go for a drive in The Chrysler?"). Haven't the heart.
Ha! There's that picture of the new Viper with The Pope and three other blokes again. (You can see it in the background).
When I predict continued dismal UNRELIAABILITY, Chrysler-Fiat cannot predict profitability. EVER. LOL...
Chrysler might return to profitability. And monkeys might fly out of my butt! John