Chrysler loses $690 million in first quarter on losses related to Fiat merger

5/12/2014

DETROIT — Chrysler Group LLC saw big sales gains in the first quarter thanks to the new Toledo-built Jeep Cherokee and the Ram pickup, but it lost money because of charges related to its merger with Italian automaker Fiat SpA.

Chrysler posted a loss of $690 million for the January-March period. Without one-time costs of $1.2 billion, the company would have earned $486 million — almost triple the $166 million in profits the company reported for the same period a year ago.

It was the first time Chrysler reported a quarterly loss since the second quarter of 2011.

In January, Fiat paid $3.65 billion to a union-run health-care trust to acquire Chrysler’s remaining shares. The two companies are in the process of combining to form Fiat Chrysler Automobiles. Chrysler Chief Financial Officer Richard Palmer said Monday that the combined company expects to list its shares on the New York Stock Exchange in the fourth quarter of this year.

As part of the merger, Chrysler agreed to pay $700 million to upgrade its factories. The company took a $672 million charge in the first quarter to meet those commitments.

It also booked a $540 million non-cash loss for refinancing a 2009 note issued to the union-run trust, which pays for retirees’ health care. Mr. Palmer said Chrysler expects to save $200 million per year before taxes thanks to lower interest rates.

Chrysler said profits were also hit by the weakening Canadian dollar, increased advertising spending, and $100 million in recall costs.

Chrysler’s worldwide vehicle sales jumped 10 percent to 621,000.

In the United States, where Chrysler sells 75 percent of its cars and trucks, sales rose 11 percent, far outpacing the 1 percent average gain for the industry.

Part of that was strong sales of the new Jeep Cherokee SUV, which went on sale in late October. Ram pickup truck sales were also up 25 percent in the United States.

The Auburn Hills automaker’s earnings results come less than a week after Fiat and Chrysler CEO Sergio Marchionne presented an ambitious five-year strategic plan that calls for global sales of the combined automaker to increase from about 4.4 million to 7 million cars and trucks by 2018.

Last week Fiat reported a first-quarter loss of $444 million during the first three months of the year.