DETROIT (AP) — Chrysler is selling more cars and trucks for higher prices, pushing the company back into the black in the latest quarter. It’s another sign that the once-troubled automaker is turning around under its new Italian management.
Auburn Hills, Mich.-based Chrysler reported Thursday that its net income was $212 million for the July-September period, its second quarterly profit this year and only the second since 2006. Vehicle sales worldwide rose 24 percent, and revenue was up 19 percent to $13.1 billion.
In last year’s third quarter, the privately held company lost $84 million, but Chrysler, now run by Italy’s Fiat SpA, said its fortunes have improved because of increased demand for its new or revamped Chrysler, Dodge, Jeep and Ram cars and trucks.
Yet even with the profit, Chrysler Group LLC hasn’t fully recovered from its 2009 brush with death. The company, neglected by two previous owners, nearly ran out of cash and needed a government bailout to survive bankruptcy restructuring.
“They are still in the most precarious position out of the Detroit Three, but they’re making progress in a market that’s really not doing that well in the first place,” said Aaron Bragman, an industry analyst with industry consulting firm IHS Automotive.
Auto sales in the U.S., Chrysler’s primary market, have sputtered all year at an annual rate of around 12.5 million vehicles as debt-weary Americans hold onto their vehicles longer. The sales rate is enough for Chrysler, General Motors Co. and Ford Motor Co., to make money, but it’s far short of the 2005 peak of 17 million.
Chrysler hasn’t made an annual profit since 2005, but it’s getting closer to profitability with a mix of strong new products.
Jeep was the top brand from a U.S. automaker in Consumer Reports’ latest reliability rankings, which were released Tuesday. Chrysler was also the most improved brand, moving to 15th place from 27th. The Jeep Grand Cherokee SUV, Chrysler 200 midsize car and Dodge Durango SUV have been among the company’s recent successes.
Chrysler, Bragman said, has raised the quality of its vehicles by revamping them in a short amount of time under Fiat’s leadership. The company, he said, has changed manufacturing methods and now puts cars and trucks through rigorous tests.
“They’ve inserted whole layers of testing that never were there before,” he said. “They’ve improved the feedback when problems do go wrong. The response time is now measured in hours rather than years.”
But even with the improvements, Bragman said Chrysler still has a way to go to change its longtime image of poor reliability. “It’s going to take a couple of years of consistency,” he said.
Chrysler’s third-quarter profit wasn’t quite big enough to erase a loss from the first half of the year. The company ended the first nine months $42 million in the red, mainly due to a $551 million accounting charge for refinancing its government debt in the second quarter. Excluding the debt charge, the company earned $509 million during the first nine months.
Chrysler increased its earnings forecast for the full year to a profit of $600 million, excluding the accounting charge. Previously it had forecast $200 million to $500 million. It also predicted 2011 revenue of $55 billion.
The company is getting healthy prices for its cars, and that’s helping it make money. Chrysler’s average U.S. sale price rose 4.5 percent in the third quarter to $30,387, according to the Edmunds.com automotive website. Also, Chrysler’s share of the U.S. market increased almost 2 percentage points to 11.6 percent last quarter.
Chrysler also got good news on the labor front this week. On Wednesday, the United Auto Workers announced that 55 percent of the Chrysler workers voting on a new contract approved the deal. The four-year pact, which covers 23,000 U.S. factory workers, will hold down the company’s costs by giving workers profit-sharing and other bonuses instead of annual raises.
During the quarter, Chrysler also helped its bottom line by cutting borrowing costs through refinancing of $7.5 billion in high-interest loans from the U.S. and Canadian governments. The company said it paid $282 million in interest last quarter, down $34 million from a year earlier.
Fiat controls Chrysler with a 53.3 percent stake in the company. Under a 2009 deal with the U.S. government, Fiat got a 20 percent stake after Chrysler exited bankruptcy protection. Fiat gradually raised its stake and gained a majority share in July, when it paid the U.S. Treasury for its remaining shares.
Fiat expects to raise its ownership of Chrysler to 58.3 percent by the end of the year, when it introduces a 40 mpg car for the U.S. market. The high mileage car was also part of its deal with the government. A union trust fund that pays retiree health care costs owns the rest of the shares.
Chrysler’s earnings also helped its Italian owners. Fiat released third-quarter earnings on Thursday, posting a 67 percent profit increase to 112 million euros ($157 million) thanks to demand for Chrysler cars and trucks in North America.
Chrysler may return to the public stock exchanges sometime next year, with the trust fund raising cash by selling at least part of its stake.