Chrysler posts $436M in 2nd-quarter profit

7/31/2012

DETROIT -- Chrysler Group LLC continued its turnaround from near death just three years ago, earning $436 million in the second quarter and confirming that it will show a full-year operating profit of at least $3 billion.

Chief Executive Sergio Marchi- onne, in an email to Chrysler's employees on Monday, warned against overconfidence in the face of the company's recent success after "living through a near-death experience" in 2009.

"History teaches that it is easy to develop bad habits during good times," Mr. Marchionne wrote in the e-mail, a copy of which was obtained by Reuters. "This is no time to cut corners, no time to become undisciplined in our execution, no time to forget how difficult it was to claw our way back to viability."

A year ago, Chrysler lost $370 million in the second quarter, including losses related to $551 million in repayments of government loans related to its 2009 bankruptcy and bailout.

Second-quarter revenue rose 23 percent to $16.8 billion.

"Our results reflect a tireless pursuit by the people of Chrysler Group to deliver the very best quality and value across our brands," Mr. Marchionne, who is also chief executive of Fiat, said in a statement.

Chrysler is majority-owned by Italy's Fiat SpA.

Fiat's earnings have been pressured by the economic crisis in Europe. Also, it relies heavily on southern European markets where sales have been hit the hardest.

Chrysler's global vehicle sales rose 20 percent, to 582,000 in the second quarter, led by a 24 percent rise in U.S. sales. Sales outside its core market in North America rose 58 percent to 70,000 vehicles in the quarter.

Earlier this month, Fiat announced its intention to exercise its call option to purchase another 3.3 percent of Chrysler, raising its stake to 61.8 percent. Neither Fiat nor Chrysler has yet indicated that the deal has been sealed.

The remaining shares of Chrysler are owned by a retirees' health care trust administered by the United Auto Workers union.

Mr. Marchionne said this month of the full-year operating profit, "The objective of $3 billion is close at hand. We could overshoot it."

Sales have steadily climbed for Chrysler since the first quarter of 2010, when it began breaking out its financial results from Fiat. At that time, Chrysler's revenue was $9.69 billion.

Through June, Chrysler has reported 27 consecutive months of year-on-year sales growth in the U.S. market.

That streak followed about 24 consecutive months of U.S. sales decreases. Mr. Marchionne and his leadership team are credited with overhauling Chrysler's vehicle lineup, which was outdated and panned in quality surveys and reviews when Fiat took control in 2009.

Fiat took management control and a 20 percent ownership stake in Chrysler as part of the bankruptcy restructuring in 2009 that saved the Michigan automaker from extinction.