Chrysler optimistic over 2011 forecast

Chrysler, the US carmaker 25 per cent owned by Italy’s Fiat, said it expected to swing to a net profit of $200m-$500m this year but cautioned the outlook is clouded by uncertainties in the key US market.

Reporting a 2010 loss of $652m, including $199m in the fourth quarter, Sergio Marchionne, Chrysler and Fiat chief executive, said the 2011 target amounted to “a pretty high objective”, and that the guidance would need to be reviewed quarter by quarter.

“I feel absolutely comfortable that we have a fully competitive product,” Mr Marchionne said. Transaction prices for Chrysler vehicles were at their highest in the fourth quarter since the 2009 bail-out.

Even so, he warned: “The important thing for 2011 is to deliver on the sales and marketing objectives that we have.” He said that US sales had weakened in recent weeks. Chrysler’s 2011 US industry sales forecast of 12.7m vehicles is more conservative than most others. Mr Marchionne said that Chrysler was “working feverishly” to expand overseas sales. He said last week that he expected the carmaker to be distributing half a million vehicles in Asia by 2014.

Carmakers after the crisis

Chrysler’s new vehicles – such as its revamped Jeep Grand Cherokee – have garnered good reviews. However, some analysts are bearish about its prospects, given tough competitive conditions and its continuing high level of low-margin sales to fleet customers.

According to Truecar, a car-buying website, Chrysler’s fleet sales fell in the fourth quarter but were higher for the full year in 2010 than in 2009.

The fourth-quarter performance was an improvement on the $2.7bn loss a year earlier. But it was higher than the third-quarter loss of $84m, due to what Mr Marchionne described as “operational complexities” of launching new models. Cash reserves shrank by $1bn to $7.3bn on December 31. Chrysler is the only one of the Detroit carmakers that is still losing money. It owes its survival to a US and Canadian government bail-out in 2009 that saw Fiat take an equity stake and assume managerial control of the company.

Mr Marchionne said that Chrysler would be profitable by now if it had been allowed to replace as much debt with equity as General Motors. Instead, interest charges of $1.2bn wiped out last year’s $763m operating profit.