Chrysler Group posted an operating profit of $239 million in the third quarter and raised its outlook for the balance of the year in anticipation of stronger sales and improved operating performance.
The results, released today, marked the automaker's third straight operating profit. Chrysler's third-quarter net loss was $84 million, down from $172 million in the second quarter. It was Chrysler's smallest quarterly net loss since emerging from bankruptcy 17 months ago.
Revenues rose 5.2 percent to $11 billion during the July-September period.
Chrysler said it benefited from an improved product mix and rising unit sales while being hurt by higher costs tied to seasonal plant changeovers.
The automaker is in the midst of launching 16 new or refreshed products over a 16-month period.
Last quarter's $239 million operating profit topped the $172 million average estimate of four analysts surveyed by Bloomberg.
The company now expects to post an operating profit of $700 million for all of 2010, up from a previous forecast of as much as $200 million. Revenues for all of 2010 are expected to total $42 billion, within the range of $40 billion to $45 billion forecast a year ago.
In addition, Chrysler now expects to generate $500 million in positive cash flow this year, compared with negative cash flow of $1 billion previously forecast.
“We are not only living up to our commitments, but we are exceeding our 2010 financial objectives,” Chrysler CEO Sergio Marchionne said in a statement. “Our 2010 accomplishments are just the beginning of building Chrysler into a vibrant and competitive automaker.”
Some analysts expected the company to provide more robust guidance for the remainder of the year and 2011, but Marchionne said the automaker wanted to be cautious because of the aggressive launch schedule.
“Given the complexity of our launches in November and December, we need to better understand the impact on profit and losses,” Marchionne said today during a conference call to discuss the third-quarter results. “But the directional movement of market growth is supportive.”
Directors are actively exploring various options to take Chrysler public next year, but it is “way to early to make that call,” Marchionne said. He added that the apparent success of General Motors Co.'s pending initial public offering signaled that the capital markets are still receptive to “automotive enterprises.”
Chrysler posted $453 million in net losses on revenues of $31 billion during the first three quarters of the year. Most of the net loss was a result of interest expenses -- $899 million through September -- largely on the company's U.S. rescue loans. After exiting bankruptcy on June 10, 2009, under the control of Italy's Fiat S.p.A., Chrysler lost $3.8 billion for the remainder of the year.
Analysts say the automaker appears to have turned the corner on the strength of ongoing cost controls and a recovery in sales.
“We think Chrysler may prove to be one of 2011's most surprising success stories,” Morgan Stanley auto analyst Stuart Pearson said in a report last week.
Worldwide, Chrysler sales dipped 1 percent to 401,000 units during the latest period. But Chrysler's third-quarter U.S. sales rose 20 percent, to 293,001 cars and light trucks.
In the United States, demand for some of the automaker's most profitable models rose sharply during the period. Sales of the Jeep Grand Cherokee rose 35 percent, Ram pickup sales were up 15 percent, and the Chrysler Town & Country minivan jumped 48 percent.
The average transaction price of a Chrysler vehicle during the third quarter was $29,350 -- 6.4 percent more than last year, according to Edmunds.com.
Chrysler has now been profitable on an operating basis for three consecutive quarters. During the second quarter, Chrysler generated $183 million in operating profits, up from $143 million in the first quarter.
In other news:
• Chrysler said 85 percent of its dealers are now profitable -- the highest level since 2000. In addition, more than 50 percent of the automaker's dealers are generating a return on sales of 1.5 percent or more.
• The automaker is exploring ways to boost leasing activity, now at 7 percent of all sales. Industrywide, leasing currently accounts for 18 percent of sales.
• Marchionne said Chrysler expects to sell more than 2 million vehicles in 2011.
• Chrysler hopes to secure U.S. Department of Energy loans within 30 to 40 days to develop vehicles and retool factories to build more fuel-efficient models. The company has applied for $3 billion in loans.
• Marchionne said he expects Chrysler's employee ranks to grow next year and that the company may add engineers. He said Chrysler is also looking at ways to keep industrial jobs in the United States.
Bloomberg contributed to this report.