Marchionne says Chrysler will be profitable by 2011

The buzz around Chrysler has been very negative, so it’s rather surprising to here CEO Sergio Marchionne express such confidence about the prospects for the company.

After a four-month deep dive into the workings of Chrysler Group LLC, Chief Executive Sergio Marchionne remains convinced the automaker can be profitable in two years.

The Auburn Hills automaker is on track to divulge its five-year plan on Nov. 4, to make public its quarterly financial statements next year and to offer public stock as early as 2011, he said.

A recent report by analyst Adam Jonas of Morgan Stanley supports Marchionne’s forecast. Jonas said Chrysler could report an operating profit of $841 million in 2010, but end the year with a net loss of $169 million. Full profitability is expected in 2011: $2.48 billion in operating profit and $952 million in net income, Jonas said.

In an interview with Toronto’s Globe and Mail, Marchionne affirmed Thursday that the automaker could reach profitability in 24 months. Just a week before, the CEO contended that “we’re not bleeding as people think we are,” noting that “the level of cost consciousness at this house is probably at a historical high.”

Some had been speculating that Chrysler might not make it another year given its challenges in the market. Marchionne had fueled some of the negative speculation when he said in September that the situation at Chrysler was “worse than we thought.”

Marchionne has an incredible track record as a turnaround specialist, but Chrysler will present the ultimate challenge. The acquisition could be a stroke of genius, as Fiat paid nothing and now owns 20% of the company with full control in exchange for the contribution of small-car technology. Fiat dominates with small cars and this offer it the opportunity to return to America. They also have Alfa Romeo which presents an upscale brand.

That said, it was reported recently that there would be a new push to turn Chrysler into an upscale brand positioned a notch above Lincoln and Cadillac. As noted by many analysts, that seems like a real stretch. Chrysler is a mess, so now consumers are supposed to start paying a premium for their cars?

In any event, it’s refreshing to hear some optimism coming from Marchionne. Hopefully he can back it up.

  

Ford shocks the market by posting a profit

2010-ford-fusion-1

The automotive landscape has been changing so rapidly it’s sometimes hard to keep up. GM and Chrysler had to be saved by the federal government, while Ford was able to avoid that fate. Their troubles have probably helped Ford, but Ford has also been on a tear with impressive new models like the Ford Fusion, and many more new models are in the pipeline.

Auto analysts expected Ford to show some improvement, but the announced numbers were a pleasant surprise for many.

Ford Motor Co. posted a surprise profit of $2.3 billion for the second quarter — a sharp contrast to the whopping $8.7 billion loss it reported for the same period a year ago — but the profit was largely due to one-time gains related to its debt reduction moves.

Even with those special items removed, the Dearborn automaker surprised Wall Street with a pre-tax operating loss of $424 million for the second quarter of 2009, excluding special items — a $609 million improvement compared with the second quarter of 2008.

After taxes and excluding special items, Ford posted an operating loss of $638 million in the second quarter, or 21 cents per share, compared with a loss of $1.4 billion, 63 cents per share a year ago. That also was a marked improvement over the $1.4 billion loss — $1.8 billion after taxes and excluding special items — that Ford reported for the first three months of the year, when it lost 75 cents per share.

Wall Street had been anticipating a loss of 52 cents per share, after taxes and excluding special items, according to a survey of a dozen analysts by Thomson Reuters prior to today’s announcement.

“While the business environment remained extremely challenging around the world, we made significant progress on our transformation plan,” said CEO Alan Mulally. “Our underlying business is growing progressively stronger as we introduce great new products that customers want and value, while continuing to aggressively restructure our business and strengthen our balance sheet.”

It looks like Alan Mulally’s turnaround efforts are on track.

  

Related Posts