Chrysler Group said first quarter net income net income dropped 65 percent to $166 million, compared with $473 million for the same quarter last year. It was the seventh consecutive quarter of positive net income for the Auburn Hills, Mich., automaker controlled by Italian automaker Fiat.
The rest of the year looks good for earnings recovery as Chrysler ramps up production of the new Jeep Cherokee, and upgraded Jeep Grand Cherokee and Ram pickup. Both the Grand Cherokee and Ram have been very popular with the public and contribute a huge percentage of the company's profits.
"We remain on track to achieve our business targets, even as the first-quarter results were affected by an aggressive product launch schedule," said Chrysler CEO Sergio Marchionne. "This quarter underscores the importance of an unwavering commitment to execute flawless vehicle introductions to reach our full potential. While the task ahead this year is daunting, we remain committed to our overall targets, including a minimum shipment increase of 8 percent and a modified operating profit of $3.8 billion."
Because of lower shipments of vehicles to dealers, Chrysler also saw a 6 percent drop in revenue for the quarter to $15.4 billion from $16.4 billion in the first quarter of 2012.
Marchionne said Chrysler Group is standing by its guidance for the year, including worldwide shipments of 2.6 million to 2.7 million units, operating profit of approximately $3.8 billion and net income of approximately $2.2 billion.
Chrysler's operating profit dropped 41 percent to $435 million, or 2.8 percent of revenue, in the first quarter, versus $740 million reported in same period the prior year. Chrysler's worldwide vehicle shipments were 574,000 units for the quarter, down from 607,000 a year ago. The drop is due primarily to the end of Jeep Liberty production, which accounted for 31,000 shipments.
Chrysler emerged from Chapter 11 bankruptcy in 2009 with help from tax-payer loans and an equity stake by the United Auto Workers Healthcare Trust. Chrysler has paid back all its loans to the U.S. and Canada. It is going through a process of negotiations and litigation to sort out a plan and schedule to buy out the UAW.
Chrysler has a good deal of upside over the next two years because not only is its SUV and pickup truck business already strong, but it will continue to replace underperforming passenger cars and crossovers that were designed under previous ownership. Marchionne said, for example, that the current Chrysler 200, which is considered a weak competitor in the mid-sized sedan segment, will be replaced in 2014.