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Chrysler's profit rises more than 300%

Chrysler reports its third straight quarterly profit, driven primarily by a 40% increase in U.S. retail sales.

April 27, 2012|By Jerry Hirsch, Los Angeles Times

Chrysler Group reported its third consecutive quarterly profit and logged its best financial performance in more than a decade.

Chrysler said it posted net income of $473 million for the first quarter of 2012, up more than 300% from $116 million a year earlier. The company said the gains were driven primarily by a 40% increase in U.S. retail sales.

It was the company's highest quarterly profit since it emerged from bankruptcy in 2009.

"Another positive quarter — built on sales gains that have surpassed the industry average — is affirmation that the Chrysler team is maintaining its focus," said Sergio Marchionne, who is chief executive of Chrysler and Italian automaker Fiat.

Fiat has a controlling interest in Chrysler, and the companies are working together to develop and sell vehicles.

Later this year, Chrysler will introduce a new generation Dodge Dart. Jointly developed with Fiat, the Dart is targeted at the small to mid-size family car market, one of the biggest segments in the industry and an area where Chrysler has lacked a strong entrant.

Revenue for the quarter rose 25% to $16.4 billion. Chrysler said the sales increase was helped by rising car prices.

If there was a weakness in Chrysler's financial results, it was that about 30% of Chrysler's sales were to fleet customers, such as rental car companies and government agencies. The retail end of the market — sales to consumers — is often a better indicator of an automaker's financial prospects, according to industry analysts.

Toyota Motor Corp.andHonda Motor Co., by comparison, generally limit their fleet business to about 10% of total U.S. sales.

Nonetheless, Chrysler has improved its competitive position since emerging from bankruptcy, said Jesse Toprak, an analyst with auto price information company

"Chrysler gained 2 full percentage points of U.S. market share compared to a year ago, while increasing their transaction prices and lowering inventory turn times significantly — all resulting in a much-improved bottom line," Toprak said. "They should still get full credit for having the most desirable lineup of vehicles that they have ever had in their showrooms."

Daimler, the owner of Mercedes-Benz, purchased Chrysler in 1998 but was unable to integrate the American company into its global operations profitably, and it sold the company to Cerberus Capital Management in 2007. Cerberus quickly ran into problems and lost control of the business during the 2009 bankruptcy reorganization and federal government bailout.

Other automakers also are reporting big profit gains.Hyundai Motor Co., helped by strong sales in the U.S. offsetting sluggish business in Europe and China, said its quarterly profit rose by almost a third to $2.15 billion. Volkswagen said its quarterly operating profit rose 10% to $4.2 billion.

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