Un Miracolo Dell'Evoluzione: Chrysler Posts A Profit

Bertel Schmitt
by Bertel Schmitt

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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  • Monty Monty on Apr 21, 2010

    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?

  • Boyphenom666 Boyphenom666 on Apr 22, 2010

    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.

  • JamesGarfield Re: Getting away from union plantsAbout a dozen years or so ago, Caterpillar built a huge new engine plant, just down the road here in Seguin TX. Story has it, Caterpillar came to Seguin City council in advance, and told them their plans. Then they asked for no advanced publicity from Seguin, until announcement day. This new plant was gonna be a non-union replacement for a couple of union plants in IL and SC, and Cat didn't want to stir up union problems until the plan was set. They told Seguin, If you about blab this in advance, we'll walk. Well, Seguin kept quiet as instructed, and the plan went through, with all the usual expected tax abatements given.Plant construction began, but the Caterpillar name was conspicuously absent from anywhere on the site. Instead, the plant was described as being a collective of various contractors and suppliers for Caterpillar. Which in fact, it was. Then comes the day, with the big new plant fully operationa!, that Caterpillar comes in and announces, Hey, Yeah it's our plant, and the Caterpillar name boldly goes up on the front. All you contractor folks, welcome aboard, you're now Caterpillar employees. Then, Cat turns and announces they are closing those two union plants immediately, and will be transporting all the heavy manufacturing equipment to Seguin. None of the union workers, just the equipment. And today, the Caterpillar plant sits out there, humming away happily, making engines for the industry and good paying jobs for us. I'd call that a winner.
  • Stuki Moi What Subaru taketh away in costs, dealers will no doubt add right back in adjustments.... Fat chance Subaru will offer a sufficient supply of them.
  • Dartdude Lorenzo, the reason for low manual transmission here is that most dealers won't stock them. I wanted a 2012 Kia Koup with manual tranny it was available, but no dealers ordered any from the factory hence there was none available. Go on any car manufacture's web site and price and build and build your model and you would be lucky if the model existed and was available.
  • The Oracle Good news is that based on the model years many of these have already been junked or experienced terminal engine failure.
  • Lou_BC I'm confused, isn't a Prologue a preview? This would be a preview of a preview.