Chrysler Group CEO Sergio Marchionne (r) escorts U.S. Treasury Secretary Timothy Geithner on a factory tour last week in Detroit.
Chrysler Group LLC today announced its first quarterly net profit – $116 million in Q1 2011 – since Chrysler began operations in June 2009 after U.S. and Canadian taxpayers financed a bankruptcy and reorganization. Chrysler Group net revenues increased 35% to $13.1 billion compared to Q1 2010. The growth was primarily due to increased sales of new cars and trucks of plus 18% to 394,000 vehicles.
“I think we did good this morning” said Sergio Marchionne, Chief Executive Officer, Chrysler Group, on a conference call for analysts and media.
Modified earnings before interest, taxes, depreciation and amortization (Modified EBITDA) was $1.2 billion or 8.9% of net revenues, a $384 million improvement from Q1 2010. Privately held Chrysler starting this quarter will file results with the U.S. Securities and Exchange Commission, a precursor to becoming a public company again, perhaps later this year depending on market conditions.
Interest expense in Q1 2011 was $348 million up from $311 million in 2010, including non-cash interest accretion of $58 million.
It is primarily the interest on government loans – $1.23 billion – that prevented Chrysler from earning a profit during 2010 and resulted in an overall loss for the year of $652 million. Chrysler has announced that it intends to pay back those loans by June of this year by refinancing them through a combination of bonds and debt in private equity placements. (See Chrysler to Repay Loans with New Debt. Fiat to Up Stake to 46%. Credit Ratings under Review for Possible Downgrade?)
Perhaps most significant in signs of a nascent – albeit slow – Chrysler comeback in auto markets that are once again growing, Chrysler generated a positive Q1 cash flow of $2.5 billion reflecting primarily the improved cash from operations as a result of increased shipments, partially offset by capital expenditures to update an aging product line.
Capital expenditures will, however, increase for the balance of the year as more new products come to market. And the largest unknown remains the effect on sales of steeply rising gasoline prices at Chrysler whose volume is more than 70% in light trucks, Jeeps and minivans – all relative gas guzzlers.
Chrysler Group also remains heavily in debt. On March 31, 2011, debt totaled $13.3 billion, slightly higher than the $13.1 billion at December 31, 2010. Net Industrial Debt decreased to $3.4 billion at the end of Q1 2011, a $2.4 billion improvement from December 31, 2010 due to the increase in cash.
Chrysler Group’s U.S. market share was 9.2% in Q1 2011, compared to 9.1% in the same period of 2010 – either a weak performance or a relative victory given its product line, depending on your point of view. Canadian market share increased to 14.7% for Q1 2011 compared to 13.7% for Q1 2010.
Worldwide vehicle shipments in Q1 2011 were 485,000, an increase of 28% versus the 380,000 vehicles shipped in Q1 2010. U.S. vehicle shipments in Q1 2011 totaled 358,000 compared to 268,000 vehicles in Q1 2010.
U.S. dealer inventory increased to 302,000 vehicles at March 31, 2011, primarily to fulfill dealer orders and consumer demand for the new and refreshed 2011 model year products that began production in late Q4 2010. Days supply is healthy at 67 days.
2011 Chrysler Group Guidance
- The targets for 2011 are confirmed as follows:
- Net Revenues of >$55 billion
- Modified Operating Profit of >$2.0 billion
- Modified EBITDA of >$4.8 billion
- Net Income of $0.2 – $0.5 billion
- Free Cash Flow of >$1.0 billion
