Chrysler Returns to Profit in 2002

Two years into a three-year turnaround plan, DaimlerChrysler’s U.S. arm showed dramatic improvement in 2002, posting a $1.38-billion operating profit, a hefty swing to the black after losing about $2 billion a year earlier.

DaimlerChrysler said that, thanks to progress in efficiency, it exceeded its original aim of simply returning the U.S. division to profitability in 2002, even as Chrysler’s full-year revenue slipped 5% to $64.8 billion because of the weaker dollar.

That means Chrysler workers will get an average of $460 in profit-sharing checks for the year -- their first since 2000.

It also indicates that the restructuring started in 2001 is producing the desired results. The automaker’s Chrysler Group has eliminated 26,000 jobs and closed six plants in the last two years.

“One year ago, some observers were skeptical that we could achieve our ambitious targets for profitability and cost reduction during 2002, much less overachieve them,” Chrysler head Dieter Zetsche said.

David Healy, an analyst with Burnham Securities Inc., said Chrysler’s turnaround was aided by near-record U.S. sales volume in the last two years -- more than many observers predicted.

Still, Healy said, it’s clear that Chrysler has made progress improving vehicle quality, which reduces warranty expenses, and squeezing suppliers for better prices. “It’s a pretty respectable turnaround given the real hemorrhaging both financially and operationally they were enduring a couple of years ago.”

Two years ago Chrysler lost $4.7 billion.

In the fourth quarter, Chrysler earned $81 million, contrasted with a loss of $388.5 million in the same quarter in 2001 -- but less than the $351.7-million profit in the third quarter. Revenue fell to $14.5 billion from $18.4 billion a year earlier.

DaimlerChrysler Chief Executive Juergen Schrempp said Chrysler made “outstanding progress” in efficiency.

“This result was achieved in a very challenging environment, as the U.S. market is still dominated by very high incentives,” Schrempp said, referring to the costly come-ons such as interest-free financing pushed by competitors General Motors Corp. and Ford Motor Co.

Chrysler, which has matched incentives while criticizing the practice, shipped nearly 2.3 million vehicles in the United States last year, an increase of 4%. At the same time, its total U.S. light vehicle sales declined 3%, as did its market share -- to 12.9% from 13% in 2001.

Earlier this month, DaimlerChrysler announced a full-year net profit of $5.1 billion and a fourth-quarter net profit of $182 million for the entire company. Thursday’s announcement broke out results for individual divisions.

The company issued a cautious 2003 forecast, avoiding a specific earnings target and saying only that earnings would be higher than 2002.

DaimlerChrysler’s shares fell 27 cents to $29.63 on the New York Stock Exchange.