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.
Chrysler Group LLC survived bankruptcy but the success of its strategy now hinges on convincing consumers to buy its cars and trucks in the critical next 12 months.
