- 08Nov
(Reuters) - Chrysler Group LLC posted a narrower quarterly loss on Monday and said it was on track to be profitable in 2010 after financing costs, helped by a rebound in sales.
Chrysler was on the brink of liquidation in 2009 before a U.S. government-funded bankruptcy slashed its operating costs and gave majority ownership to a union-affiliated trust fund and management control to Fiat SpA (FIA.MI).
The automaker reported a net loss of $84 million, compared with a net loss of $172 million in the second quarter.
Excluding $308 million in interest on loans and other expenses, the company posted an operating profit of $239 million, its third consecutive profit on that basis.
Revenue was about $11.02 billion, up from $10.5 billion a quarter earlier.
Chrysler raised its full-year financial forecast, saying it was making progress in an ambitious five-year turnaround plan that will hinge on the success of a raft of new vehicles and shared engine technology with Fiat.
"After three consecutive quarters of better-than-forecasted results, we are not only living up to our commitments, but we are also exceeding our 2010 financial objectives," Chief Executive Sergio Marchionne said in a statement.
Chrysler now projects an operating profit of $700 million for 2010, up from its previous outlook of break-even to as much as $200 million.
Despite Chrysler's progress, it has relied heavily on sales to rental-car agencies, which typically carry a lower margin than showroom sales to consumers.
In the third-quarter, vehicle sales slipped about 1 percent to 401,000 units due to lower fleet volumes in the United States and Canada, Chrysler said.
Chrysler does not disclose what percentage of its overall sales come from fleets, but industry estimates pin it at around 40 percent.
Its average incentive spending dropped to $3,900 per vehicle, from $4,200 in the second quarter. But the average price of its cars fell slightly to $27,300 from $27,400.
SALES AHEAD OF INDUSTRY
Chrysler's sales in the United States were up 17 percent through October compared with an 11-percent gain in industry-wide sales.
Results have been boosted by a rebound in sales of trucks and strong gains for Chrysler's fully redesigned Jeep Grand Cherokee.
In a sign of progress, Chrysler said about 85 percent of its dealers were now profitable -- the highest level since 2000 -- the industry's last boom year. Under a controversial provision of its bankruptcy, Chrysler cut almost one-quarter of its U.S. dealers.
The automaker emerged from a bankruptcy brokered by the Obama administration last June in the face of skepticism by some analysts and government officials about whether it could survive even in its restructured form.
It has been reporting quarterly results for the past four quarters in preparation for an initial public offering of stock in 2011.
Chrysler's third-quarter results come one year after it unveiled an ambitious five-year turnaround plan during a marathon eight-hour session at its Auburn Hills, Michigan, headquarters.
Chrysler now projects free cash flow of $500 million, and revenue of $42 billion for the year, roughly in the middle of its earlier range of $40 billion to $45 billion.
Earnings before interest, taxes, depreciation and amortization for the year are expected to be $3.3 billion, up from its earlier outlook of $2.5 billion to $2.7 billion.
Chrysler is launching 16 new and refreshed vehicles, including the Fiat 500 subcompact, to win back market share in the United States.
The company relied on the U.S. market for 73 percent of its sales in the third quarter. Its market share in the United States rose to 9.6 percent in third quarter, up from 9.4 percent in the second quarter.
Chrysler's larger rival, General Motors Co GM.UL, is slated to go public later this month.
Chrysler said it had clinched a tie-up with US Bancorp (USB.N) to provide vehicle financing for its customers, an area where the automaker has lagged its larger rivals.
Chrysler's stand-alone finance company, Chrysler Financial, is being wound down in bankruptcy. It also has a relationship with Ally Bank GMACA.UL, formerly known as GMAC, for vehicle financing.
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