Chrysler 2nd-Quarter Profit Off 53%
Chrysler Corp. said Friday that profit dropped 53% in the most recent quarter because of a monthlong strike and a tough car market that forced the company to boost rebates.
The $483-million second-quarter profit, or 70 cents a share, was in line with Wall Street expectations, and some analysts were upbeat about Chrysler’s earning potential later this year.
“This is actually a pretty good indication of what Chrysler can earn in a very difficult economic environment,” said Jack V. Kirnan, an analyst with Salomon Bros.
Chrysler’s revenue reached $14.4 billion for the quarter, down from last year’s $15.8 billion. Profit in the second quarter last year was $1.04 billion, or $1.39 per share.
The No. 3 auto maker said a strike at an engine plant in Detroit that temporarily shut down seven plants and idled more than 23,000 workers took $438 million off its bottom line. The company said it lost production of 94,000 trucks from the strike in April and May, but managed to make up 5,000 of them.
At the same time, competition forced Chrysler to boost dealer incentives to $980 per vehicle, a 56% increase from incentives during the same quarter a year ago.
“The second quarter was a very difficult one for Chrysler,” said Chrysler Chairman Robert J. Eaton.
“While the general economy and consumer confidence continue to look good, increased competition and softer sales have forced us to increase incentives and step up our ongoing efforts to eliminate waste and reduce expenses,” he said.
The company has put a temporary freeze on outside hiring, reduced overtime and travel and delayed some capital spending, Eaton said.
Chrysler’s stock rose 50 cents to close at $35.38 on the New York Stock Exchange.
Nick Lobaccaro, an analyst with Merrill Lynch, said the third quarter will be difficult for Chrysler because of market pressures and because it won’t immediately feel the impact of new-vehicle launches.
But he said the company could make up for strike-related losses by the end of the year.
“The fourth quarter is the key,” Lobaccaro said. “It’s quite conceivable they could do very well.”
Chrysler was the first of the Big Three auto makers to report second-quarter earnings. Ford Motor Co. and General Motors Corp. are slated to report their earnings Wednesday.
