Filed under: Trends, Chrysler, LLC., Earnings/Financials
Neat trick: Chrysler claims $1.1 billion profit
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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Reader Comments (Page 1 of 2)
BlackCanary 11:06AM (8/08/2008)
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.
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BlackCanary 11:27AM (8/08/2008)
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.
nastinupe 11:37AM (8/08/2008)
Damn Autoblog. You have been really slow the past couple of days. Nothing new or exciting to post. No ring times, no sports cars. I'm bored.
3cubed 11:44AM (8/08/2008)
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!
Ben 11:09AM (8/08/2008)
I think it's called "Revenue" and not profit. Profit is only considered as a difference between expenses and revenue.
I could be wrong...
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BlackCanary 11:18AM (8/08/2008)
Profit is a factor of revenue. If Chrysler only made $1.1MM in total revenue thay would have gone out of Business long ago. Total revenue is well over $60MM with expenses that rival that.
Mike 11:25AM (8/08/2008)
The article is right; it is correctly called EBITDA, or a form of gross profit. To simplify, revenue refers to the sales before the expenses related to making these sales have been subtracted. EBITDA refers to earnings after most of these expenses have been subtracted (except, of course, interest, taxes, depreciation, and amortization).
EBITDA is one way of looking at the operating health of an organization, because it strips away the 'paper' losses of depreciation and amortization.
AZMike 11:15AM (8/08/2008)
as always, stories of Chrysler's demise are greatly exagerrated. love to see all the naysayers who don't have a clue about Chrysler's history, i.e., the ones that truly believe that the government actually gave Chrysler a "bailout" in the 80's. news flash: the government never gave them a dime. they will also come out of this in great shape, just like they always do, and a stronger company for it.
another little hint: don't think for a minute that the days of "easy credit" are remotely over. the manufacturer's captives (Chrysler Financial, Ford Motor Credit, GMAC, Toyota Motor Credit, Nissan Motor Acceptance, et al) are there is more the metal. many times, they will take the usual credit "tier" system and throw it out the window.
banks may tighten up, but the captives will get you moving.
AZMike
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Frank 11:35AM (8/08/2008)
i agree w/ ur assessment about C. I don't think they will go under as quickly as everyone says. If people did their research on Cerebus they would know the people who run that outfit are extremely good at what they do. While not stripping it of its limbs and selling them individually is not their core competency; Cerebus is uniquely positioned to provide relief to the flailing company. If their new offerings are any indication Cerebus is listening and doing a better job. When the small cars come out we will see but I doubt Cerebus will puts its name on a crappy car. Do your research and stop bashing, u can't turn around a failing AUTO company in 2 years ...
anahit 1:05PM (8/08/2008)
A bailout doesn't require a cash outlay -- it requires special treatment from the government intended to keep a company afloat. And Chrysler got that in spades.
The feds guaranteed over a billion dollars in loans to Chrysler. That means Chrysler got money it likely wouldn't have received otherwise and at a favorable rate it wouldn't have received otherwise.
The feds even passed a law that allowed Chrysler to essentially reorganize and restructure like a bankruptcy would. This forced many of Chrysler's creditors to swallow payments of a third of what Chrysler owed them. In addition, the law allowed Chrysler to convert $700mm in debt into crummy stock with little rights or privileges.
The fed's bailout of Chrysler was more advantageous to Chrysler than a mere cash payment. They got to write off debt and get new, sweetheart loans. That's a bailout.
Tim 1:33PM (8/08/2008)
I'd bet against a Chrysler turnaround all day long... AZ mike to only reason Chrysler didn't take the taxpayer down with them was that gas prices went down all throughout the 80's plain and simple. People bought trucks, minvans and SUV's where ALL of their profits came from
Easy money is still here but that money doesn't want anything Chrysler is making
Bailout, gov't loan, whatever you want to call it by the end of Aug... GM will follow shortly. Times theyrachangin'...
AZMike 6:49PM (8/08/2008)
anahit,
I'm glad you're such a expert about how the Chrysler loan guarantees went down in 1981. are you speaking from a point of personal knowledge? I was a Dodge dealer for eleven years, from 1982-1993. I can speak from personal knowledge.
loved your comments about the "crummy stock"! I'm sure this would be news to the Chrysler employees at that time. just in case you didn't know (and obviously didn't) Lee Iacocca used this an incentive for the employees, since Chrysler couldn't afford to pay the wages that the other manufacturers were. Lee gave them the difference in stock that they could cash in when the loans were repaid. of course, all the "expert pundits" (I'm sure you would have been in this group back then) said this was ridiculous, as the stock was "worthless".
fast forward to 1985. Chrysler pays off the loans SEVEN YEARS EARLY.
the employees who took the "crummy stock" are now ALL millionaires, with the payout for the average line worker being $1.2 MILLION DOLLARS!
don't know about you, but I'd take crummy stock like that any day.
...and Tim, hate to tell you, but NO ONE was buying any Chrysler Pickups in the 80s (you know, the ancient ones designed in 1970), and the only SUV they had in the 80's was the Dodge Ramcharger. another vehicle that sold in small numbers. the volume lines were the K-car and it's derivitives, and of course the incredibly successful minivan that defined the segment. I wasn't aware that these were gas guzzlers; thanks for enlightening me!
Chrysler did purchase Jeep in 1987, and had the products under their umbrella by the 1988 model year. in the 80's, the only Jeep SUV was the Cherokee, and it was far from thirsty.
AZMike
azzo45 11:38AM (8/09/2008)
AZMike... You are miss leading AB reader to say Joe Average line worker or white collar workers are "millionaires" & most made about 1.2million.
Those are the workers who could afford to GAMBLE!!! Most Chrysler workers SOLD the stock after the doubled or tripled their $$$. The stock was around $3.25 a share at its lowest. My father sold a majority of Chrysler stock @ $15-$20 a share. Most investors are extremely happy doubling their investment.
He had to make sure he had a back-up plan for his family. If there was as many Chrysler "millionaires" as you say... the retirees would not have been sweating Chrysler's decision to DISCONTINUE many of the life insurance & medical benefits (promised as part of their retirement package).
Your review of the loan guarantees are 100% spot on... my Dad would want to choke people who called it the "Chrysler BAILOUT".
anahit 4:21AM (8/10/2008)
AZMike, you completely ignore my point -- it was a bailout. You also don't refute any of my reasons why it was a bailout instead of, well, whatever you think it was.
I do, however, find it interesting how you ask if I am speaking from personal knowledge, then get even more defensive about Chrysler than your other posts in this thread. Perhaps not having personal experience in the bailout is helpful in objectively analyzing it.
compy386 11:15AM (8/08/2008)
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.
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Franz 11:33AM (8/08/2008)
Thanks very much for the perspective. I knew something sounded funny.
BlackCanary 11:41AM (8/08/2008)
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!
compy386 11:57AM (8/08/2008)
How do I apply for the job? :)
zamafir 11:18AM (8/08/2008)
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
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John R 11:19AM (8/08/2008)
You know. I'm rolling in the dough before taxes and bills, too.
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