Earnings Preview: Chrysler could see weak 3Q
Chrysler could see weak 3Q earnings with delay of Cherokee launch and lackluster US sales
DETROIT (AP) -- Delayed shipments of the new Jeep Cherokee will likely trim Chrysler's third-quarter profit, though strong U.S. sales of the Ram pickup and Grand Cherokee SUV will mitigate that. CEO Sergio Marchionne's mission to unite Chrysler and Italian automaker Fiat SpA is ongoing as the Chrysler Group reports on its quarterly performance Wednesday before the open of trade on Wall Street.
WHAT TO WATCH FOR: Like the first quarter, when a delay in shipments of the new Ram pickup and Grand Cherokee SUV caused a 65 percent drop in profits, delays launching the new Jeep Cherokee will cost Chrysler. The new, small SUV, which is made in Toledo, Ohio, was scheduled to go on sale in September. That date was pushed back so Chrysler could fix issues with its new nine-speed transmission. Chrysler finally began shipping Cherokees last week.
U.S. sales of the Ram rose 23 percent in the third quarter compared with the same period last year, and Chrysler also made more per truck, Kelley Blue Book said. Buyers paid an average of $36,724 per truck in the third quarter, up 5.3 percent from a year ago. Jeep Grand Cherokee sales also rose 30 percent, and buyers paid 9 percent more, or $40,175 per vehicle, for the newly revamped SUV.
Overall, however, it was a lackluster quarter in the U.S., where Chrysler does three-quarters of its business. Chrysler's sales rose 7.7 percent, lagging the total industry increase of 12 percent. The Chrysler, Dodge, Jeep and Ram brands saw sales increases, but Fiat's U.S. sales fell 7.5 percent. Chrysler didn't gain any U.S. market share compare to the same quarter a year ago.
WHY IT MATTERS: Under the ownership of Fiat, the Auburn Hills, Mich., automaker has been transformed since its 2009 trip through bankruptcy protection. Marchionne has acknowledged growing pains as the company tries to rapidly increase production and introduce new products.
"You need to remember that in 2010 we produced 1 million cars. We're now at two-and-a-half times that level," Marchionne said in July.
Marchionne's hope is to combine Chrysler and Fiat, but he first must convince the union-run trust that owns a 41.5-percent stake in Chrysler to sell its share to Fiat. The trust says that stake is worth $4.27 billion, while Fiat says it's worth $1.75 billion. Chrysler's third-quarter financial results could impact those negotiations.
LAST YEAR'S QUARTER: Chrysler earned $381 million on revenue of $15.5 billion in the July-September period a year ago.
