Un Miracolo Dell'Evoluzione: Chrysler Posts A Profit
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.
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Is it possible that the initial stage of the 5-year plan was realistic and achievable? Maybe. Is it also possible that members of the UAW, the majority owners of what's left of Chrysler, are concerned enough about their stake to care about the product quality and finding efficiencies in the manufacturing process? In all likelyhood this is a large factor in the results. I think not enough credit is due Sergio Marchionne; he may appear to be an Italian version of Bob Lutz, but he's been accurate with some of his assumptions of the various markets and what the short term results would be. Not exactly something you can say about most of GM's executives, is it?
Sorry for reposting what I said in another thread, but it needs to be said here. Stop being such party poopers! They made $143 million in operating income, before interest and taxes, and ended the quarter with $1.5 billion in additional cash. That’s no small feat from a company hollowed out by years of Daimler mismanagement. Chrysler had $4 billion in cash in June after exiting bankruptcy, $5.9 billion at the end of the year, and $7.4 billion now. That sounds like a pretty solid performance for a company previously written off as dead, if you ask me.