CEO says Chrysler could beat forecast

5/11/2010

Chrysler Group LLC, the U.S. automaker run by Fiat SpA, may beat its earnings forecast and generate cash this year if results through September are as strong as in the first quarter, its top executive said.

"The run rate we've got now, especially the cash-flow number, in all likelihood is highly conservative," Chief Executive Officer Sergio Marchionne told analysts yesterday on a conference call.

Chrysler has said it expects break-even to a $200 million profit on an operating basis this year, and to use up $1 billion in cash. The company posted a $143 million operating profit in the first quarter after cutting costs and introducing a large pickup truck. The Auburn Hills, Mich., automaker exited bankruptcy in June with government aid.

"Their numbers are going in the right direction," said Michelle Krebs, an analyst at Edmunds.com, of Santa Monica, Calif. "They're laying the groundwork for an initial public offering."

Chrysler reported a net loss of $197 million for the first quarter. The company issued the 2010 earnings forecast in November and reiterated it on April 21 with results for the first three months. Chrysler said it had $7.37 billion in cash as of the end of March.

The automaker from its June 10 emergence from court protection through the end of 2009 reported a loss of $3.8 billion on revenue of $17.7 billion. Fiat obtained a 20 percent stake in Chrysler after the U.S. company reorganized in Chapter 11 with $15 billion in government support.

Chrysler has forecast full-year revenue of $40 billion to $45 billion and earnings of $2.5 billion to $2.7 billion before interest, taxes, depreciation, and amortization.

Mr. Marchionne, who also is CEO of Fiat, eventually plans to offer Chrysler shares to the public and spin off the Turin, Italy-based company's automotive operations from its divisions that make trucks and tractors.

He has said Fiat expects to boost its Chrysler stake to 25 percent this year by meeting a target to introduce its 500 small car in the United States. Fiat agreed to share technology, systems, and management with Chrysler in exchange for the initial stake.

Fiat can obtain as much as 35 percent of Chrysler. The U.S. has about 9.9 percent, Canada owns 2.5 percent, and a United Auto Workers trust for retiree medical care holds 67.7 percent, according to bankruptcy court documents.