Jeep, truck sales power Chrysler to second-quarter profit

Helped by robust sales of Jeep sport-utility vehicles and Ram pickup trucks, Chrysler Group on Wednesday reported a jump in profits for the second quarter.

The automaker said it earned $619 million, up 22% from the same period a year earlier. Revenue jumped 14% to $20.5 billion.

Chrysler, which is in the final stages of merging with Italian automaker Fiat to create Fiat Chrysler Automobiles, said it had global vehicle sales of 723,000 in the quarter, up 12% from a year earlier.

Much of the gain came from increased retail sales in the U.S. The automaker’s sales to fleet customers – rental car companies, commercial businesses and government agencies -- declined slightly. Chrysler’s U.S. market share was 12.1% for the quarter, up from 11.4% a year ago.

The automaker continues to look at ways to improve its profit margin, said Sergio Marchionne, chief executive of both Chrysler and Fiat.

One opportunity may come later this year when Ford Motor Co. brings out its new aluminum F-150 truck. Ford plans to increase the starting price of its truck line by $400 to $3,000, depending on the model and engine. That might give Chrysler room to increase prices for its Ram trucks, Marchionne said.

But “this continues to be an incredibly competitive marketplace,” and it’s not clear that truck pricing is headed up, he said.

Although Chrysler is seeing brisk sales of its Jeep SUVs and Ram trucks, Marchionne said he won’t be adding any new assembly lines.

“I am reluctant to engage in wholesale expansion of capacity in the U.S.,” he said. “The downside risk in a downturn is too great.”

Marchionne doesn’t want to be stuck with the type of excess production capacity that helped drive Chrysler into bankruptcy and into the arms of Fiat back in 2009.

Instead, the automaker is working to find ways to get more trucks and SUVs out of its existing factories.

Marchionne said a legal hitch in Italy could derail the formal merger of Chrysler and Fiat but won’t stop the companies from operating as a single entity as they have since the start of the year.

Last week, Fiat shareholders voted to approve the merger. But Italian law gives dissenting shareholders the right to cash out, Marchionne said. They have until Aug. 20 to register their dissent and ask Fiat to purchase their shares. The terms of the merger don’t allow Fiat to spend more than 500 million euros on buying out dissenters.

Fiat’s shares are trading below the 7.727 euros strike price they would receive from the company. That might encourage more shareholders to cash out than would fit under that cap.

If that were to happen the merger would be off, Marchionne said.

In that case, “we will reconvene at the appropriate time and try to get it done again,” he said. But operationally it would have little effect on the business.

The primary drawback is that it would delay the listing of Fiat Chrysler Automobiles on the New York Stock Exchange, which will give the company better access to the capital markets, Marchionne said.

Once merged, the company will become a Dutch holding company with a corporate office in London. The North American operations will be run out of Chrysler’s headquarters in Auburn Hills, Mich. Its European operations and much of its international business will be based at Fiat’s offices in Turin, Italy.

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