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It's a claim that needs a big, fat asterisk after it, but Chrysler's Jim Press is cheerily touting a $1.1 billion dollar gross profit. The number, which wasn't pulled out of a posterior orifice but has yet to be adjusted, is known as the EBIDA, or earnings before interest, depreciation, and amortization. Well, shoot, if you take all of the albatrosses off the necks of the automakers, they're all cranking along with nice gross profit numbers. Too bad that Chrysler's gross profit will turn into a disgusting loss once the accounting is done. It's good news that Chrysler's still making some money, even if a gross profit will turn into a net loss, and Press seems to indicate that Chrysler is aimed at right-sizing itself for future success. Moving vehicles is increasingly becoming a challenge as we suffer a hangover from the boom years of easy credit, and total volume is bound to be off by millions compared to just a few short years ago. Chrysler's product line doesn't strike us as well situated to eventually earn a net profit, saddled as it is with subpar interior materials, powertrains that want for refinement and output (in everything that's not V8- or Hemi-powered, that is), and uninspired design, but if Cerberus hangs in there instead of making everyone's strip and flip fears come true, the automaker may be able to get its act together for its product line after 2010.

[Source: Motor Trend]


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  • 23 Comments
      • 6 Years Ago
      I think it's called "Revenue" and not profit. Profit is only considered as a difference between expenses and revenue.

      I could be wrong...

      Two kinds of profit, Gross and Net

      And a world of difference in between---

      "interest, depreciation, and amortization."

      Most businesses claim depreciation but it's really just a "paper" figure in most cases and never actually makes it to an "actual" depreciation account to be used to cover depreciation. In the real world most of that money gets used on a monthly basis to cover --whatever.

      So the Gross figure is a true gross figure.
      • 6 Years Ago
      By comparison in the last quarter (Q1) Ford earned 8 billion in gross profit and reported 100 million net income. GM earned 4 billion in gross profit and recorded a 3 billion loss. It's a good bet the Chrysler is bleeding if all they made was 1 billion in gross profit.
        • 6 Years Ago
        That is the type of information I expect in the AB article not random confecture without anything to support the claim. Maybe you should write for AB!
      • 6 Years Ago
      So, Press, if everything's so peachy at Chrysler why not "cheerily tout" the *net* profit numbers? It's painfully obvious Nardelli & Co. are picking through the crap that is Chrysler's financials to find nuggets to throw to the press.
      • 6 Years Ago
      By the way. There's nothing wrong with their interiors. I was just at the Dodge dealership checking out the new Challenger and looked over all their product line. All looked great.
        • 6 Years Ago
        It's not necessarily just looks. It's quality and how well the materials hold up. Check out a dodge challenger forum, people are already complaining that their seats are coming apart at the seams.

        In every day use the plastics in some of their cars are extremely brittle and prone to scratching. I'm hoping that the interior redesigns they're talking about will be more than cosmetic additions of shiny chrome accents and more standard features, and more about how well the materials hold up.
      • 6 Years Ago
      Net profit was...?
      • 6 Years Ago
      Gross profit is not revenue or EBITDA. Speaking very broadly... Gross Profit is Revenue minus Cost of Goods Sold (COGS). Revenue is the number of cars (mostly trucks and SUVs) sold times the sale price. COGS is the material, labor, etc to build the cars (not counting front office, R&D, etc). Gross profit minus Operating Expenses (sales & marketing, advertising, travel, supplies, insurance, rents, fees, warranty, salaries, bonuses, etc) gets you to EBITDA.

      I suspect once they subtract all the operating costs they will be way negative and back into the fire.
        • 6 Years Ago
        Excellent point. Gross profit doesn't even include SG&A. It's surprising how little most people know about financials and how they work.
        • 6 Years Ago
        tom, but the amount reported IS EBITDA, therefore by your explanation already accounts for the operating expenses. It doesn't count "paper" costs, like amortization and depreciation - which granted for a business like manufacturing would be quite a bit - but those don't represent cash outflow at the time. So what this really shows is that there is not really a negative "cash flow" problem, but there is LIKELY still an issue with overall profitability.

        Speaking of which, as far as the original blog post goes, the author has no basis on which to state categorically how "disgusting" the loss will be. That just seems like dog-piling to me.
      • 6 Years Ago
      There is no guarantee other than conjecture that the 1B profit will turn into a net loss. I don't understand the tone of the entry. What is the authors logic to support his claim? He may be correct but there is nothing in his writing to support such an unfounded statement. If nothing else it is poorly written.
        • 6 Years Ago
        nastinupe, I was thinking the same thing. If you click on the source link the article is dated August first. That's like a whole week ago!
        • 6 Years Ago
        I am not claiming that the 1.1MM will turn out to be a net profit all I am saying is there is no support given in the entry, to me that is an unfounded claim. It does not matter if it is assumed, there should be some support to the argument. There is none.
      • 6 Years Ago
      great entry- one of the most apt and succinct you guys have written! Keep up the great work... And maybe link blackcanary to the losses mercedes stated pursuant to Chrysler last week so he can get with the times
      • 6 Years Ago
      You know. I'm rolling in the dough before taxes and bills, too.
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