Chrysler earns first annual profit in more than a decade
Chrysler Groupearned its first annual profit as an independent company since 1997, a sign that the Detroit automaker is recovering from its bankruptcy reorganization and the conflicting strategies of its recent owners.
Chrysler said it earned $183 million last year, compared with a loss of $652 million in the prior year. Sales rose 31% to $55 billion.
“The house is in good order. We are proud of the work we’ve done,” said Sergio Marchionne, who is chief executive of Chrysler and Fiat, the Italian automaker that owns a controlling interest in the company.
“We are looking at 2012 with some degree of enthusiasm,” he said. But he noted that competition in the U.S. marketplace will be tough. Rivals are all producing strong products.
“Nobody is falling asleep at the switch here,” Marchionne said.
Since emerging from bankruptcy in 2009, Chrysler has introduced new models and merged development operations with Fiat, which owns 58.5% of Chrysler’s shares. A healthcare fund known as the VEBA trust and operated by the United Autoworkers Union owns the remainder of Chrysler’s shares.
Helped by a memorable “Imported From Detroit” advertising campaign launched during the Super Bowl last year, Chrysler sold 1.4 million vehicles in the U.S. last year, a 26% gain. Its share of the U.S. market grew to 10.7%, up more than a percentage point., according to Autodata Corp.
Since emerging from bankruptcy in 2009, Chrysler has spent about $4.5 billion on its factories and facilities in the U.S. and Canada and added about 9,400 jobs after a period of steep employment reductions. It now employs more than 57,000 workers.
“It is great to see that the phoenix can come out of the ashes,” said Thilo Koslowski, an auto analyst at Gartner Inc. “Chrysler has really changed its culture. The organization is much more empowered that it has been in the past and it is coming out with exciting products.”
The rebirth of the Dodge Dart is one example, Koslowski said.
A 2013 model, the Dart will be the first Chrysler vehicle based on a Fiat architecture, in this case the Alfa Romeo Giulietta. It will be produced at Chrysler’s Belvidere Assembly Plant in Belvidere, Ill.
Chrysler looks to be solidifying its position in the U.S. market after more than a decade of changing owners with varied business strategies.
“They have been able to turn the company around,” said Rebecca Lindland, an analyst with IHS Automotive. “I think we will continue to see positive things from Chrysler.”
Daimler AG, the owner of Mercedes-Benz, acquired Chrysler in 1998 but was unable to integrate the American company into its global operations profitably. The deal was billed as a “merger of equals” but the German automaker called the shots, selling Chrysler to Cerberus Capital Management in 2007.
But Cerberus quickly ran into problems managing the automaker as the U.S. economy slid into recession, and it lost its control of the business during the 2009 bankruptcy reorganization and federal government bailout.
One problem, Marchionne said, is that previous owners “cheapened” the vehicles by spending less on the interiors and other content and that hurt Chrysler’s competitive position in the marketplace.
Koslowski said Chrysler has reversed that strategy and is gaining notice for better styling and greatly improved interiors in its vehicles.
For the fourth quarter, Chrysler reported net income of $225 million, a swing from a loss of $199 million in the same period a year earlier. It was the company’s highest quarterly profit since it emerged from bankruptcy in 2009. Sales rose 41%, to $15.1 billion, in the quarter.
The company also is building up its cash. Chrysler had $9.6 billion at year-end, up from $7.3 billion from a year earlier.
In May, the reorganized Chrysler paid $9.2 billion to retire $6.7 billion in loans and interest owed to the U.S. and Canadian governments. The payments hurt the company’s financial results. Its net income was reduced by a $551-million loss on the extinguishing of the debt.
The shell corporation -- what’s left of the prior business -- still owes more than $3 billion in government loans.
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