Chrysler posts $225M in Q4 net income, finishes 2011 with a profit

DETROIT -- Chrysler Group reported net income of $225 million in the fourth quarter as surging U.S. sales led the automaker to its first annual profit since emerging from bankruptcy in 2009.

The fourth-quarter profit reflected a $424 million swing from a net loss of $199 million during the same quarter of 2010, Chrysler said in a report today.

For all of 2011, Chrysler posted net income of $183 million in a year when it repaid its government bailout loans and captured U.S. market share. That compares with a loss of $652 million in 2010.

Chrysler strode back into the black on the strength of a much-improved product lineup, leaner production costs, and the growing global strength of its Jeep brand and other vehicles. Chrysler sold 1.37 million light vehicles in the United States last year, a 26 percent gain in a market that advanced 10 percent.

Globally, Chrysler said it sold 1.85 million vehicles in 2011, up 22 percent from 2010. The automaker said it had sales of 479,000 units during the fourth quarter, up 28 percent from the same period a year ago.

The annual profit came despite a $551 million charge in the second quarter to refinance its loans from the United States, Canada, and Ontario provincial governments. Chrysler, with the help of those loans, emerged from a brief stint in U.S. bankruptcy court under the control of Fiat S.p.A. in June 2009. Fiat now owns 58.5 percent of Chrysler.

Fourth-quarter revenues grew 41 percent to $15.1 billion. Revenues for 2011 were $55 billion, up 31 percent from 2010.

"The house is in good order. We are proud of the work we've done," Chrysler-Fiat CEO Sergio Marchionne said in a statement. "Now we greet a new year of high expectations with our heads down, forging ahead and focused on executing the goals we've set for ourselves as a company."

In a letter to employees today, Marchionne said Chrysler will give a "performance award" to eligible salaried and union represented workers based on the 2011 results.

"This is a reward that you have earned. You have been to hell and back, and you defied predictions of our demise," Marchionne said in the letter. "Your efforts rewrote the history that so many naysayers had forecast."

The company reported cash of $9.6 billion, up from $7.3 billion one year ago, and said it had a gross industrial debt of $12.5 billion at the end of 2011, down from the $13.1 billion it had at the same point in 2010.

Performance bonuses

In a letter to Chrysler employees today, Marchionne said that based on the company's 2011 achievements, "I am pleased to inform you that a performance award payment will be made to all eligible salaried and represented employees."

On a conference call with analysts after Chrysler's earnings announcement, the automaker's top executives did not disclose the size of promised performance bonuses to employees, but did deal with a variety of other issues.

Richard Palmer, Chrysler's chief financial officer, said half of the 400,000 additional vehicles Chrysler wants to sell in 2012 are slated to come from retail sales growth in the United States. The rest will come from international sales and added contract manufacturing for Fiat, such as the Lancia-badged versions of Chrysler brand vehicles.

Marchionne said Chrysler's improved relationship with suppliers is helping to hold down its production and development costs without having to remove content from vehicles.

"Decontenting efforts don't do much. Eventually, the consumer catches on," Marchionne said. "I think we've begun to see the first signs of a healthy relationship with the supply base that allows us to keep up with the cost structure."

Market share

Asked if Chrysler could continue to capture market share even as Asian automakers recover, Marchionne said Chrysler Group would continue to work hard and strive for further gains.

"I think we need to be cognizant that all of the competitive base is in a position to compete. We can't take anyone for granted," the Chrysler-Fiat CEO said.

Marchionne said that while Chrysler provided all of the profit for parent company Fiat during the fourth quarter, it was not a trend that he would allow to continue.

"I certainly have no intention of supporting that nonsensical arrangement. Somebody better get off their butt and snap to it, because we're not pulling the cart here," he said, adding that Chrysler financially supporting Fiat "cannot be a long-term solution."

Palmer said that Chrysler's fleet proportion of 28 percent was "still too high for our liking." He said that about three-quarters of its fleet sales were to rental car companies, and that the automaker wants to drive its fleet percentage down to 20 percent.

Competitive disadvantage

Asked for his thoughts on Chrysler's requested loans from the U.S. Department of Energy, which have yet to be awarded, Marchionne acknowledged the automaker could live without them, but would be at a competitive disadvantage if they were not approved. The loan program, approved in 2007, is designed to provide incentives to automakers to improve the fuel efficiency of their vehicles.

"I do not know today of a single project so far that's been postponed because of the lack of funding," the Chrysler-Fiat CEO said.

"I'm the only guy that's sitting over here that's paid back everything," he said in a pointed but unnamed reference to General Motors, which is still about one-third owned by the U.S. Department of Treasury. "I grew up in an environment where everybody got treated the same."

Marchionne said his interest in finding a third partner for Fiat and Chrysler continues, and has been echoed by other automotive executives. However, he added: "My phone has not been ringing off the hook here," he said.

Dear Colleagues,

For the second straight year, we have delivered on the ambitious financial targets we set as part of the five-year plan that we revealed to the world on Nov. 4, 2009. In the results that we announced today, we posted net income of $225 million in the fourth quarter, and full-year net income of $183 million. We also reported a modified operating profit of $508 million in Q4 2011, and $2 billion for the total year.

We posted a net profit for the year even as we booked a loss of $551 million to pay off all of our U.S. and Canadian government loans with interest, six years ahead of schedule. This repayment justified the faith placed in us by those who courageously stood by Chrysler in our darkest hours. It also freed us to move forward to chart our own destiny in partnership with Fiat.

Our net revenue in the fourth quarter was $15.1 billion, representing a 41 percent increase from the same period the year before, and full-year net revenue came to $55 billion. We ended the fourth quarter with $9.6 billion in cash, bringing total available liquidity to $10.9 billion.

The revamping of our product portfolio drove these results. We not only introduced 16 all-new or significantly refreshed vehicles to the market in just 19 months, but we also did it with a quality of execution that was far beyond any conventional expectation. Our worldwide vehicle sales were up 28 percent in the fourth quarter versus a year earlier, and for the full year grew 22 percent from 2010. We shipped two million vehicles in 2011, a 26 percent increase from the year-before total.

Based on the Company's 2011 achievements, I am pleased to inform you that a performance award payment will be made to all eligible salaried and represented employees.

This is a reward that you have earned. The more difficult the task, the more satisfying it is to overcome all obstacles. You have been to hell and back, and you defied predictions of our demise. Your efforts rewrote the history that so many naysayers had forecast.

As we move forward with Fiat, let's remain flexible in order to continue to achieve and take advantage of changing conditions while maintaining the same high level of passion and integrity that has brought us the measure of success we have had so far.

We have set an example of resilience, and the numbers announced today are evidence that our comeback is real. In bringing Chrysler up from the darkest depths, we have shown that the only difference between the possible and the impossible is that the impossible has just never been done before.

Now it's time to stay steadfast on our path, guided by the same commitment and same values that we have used to steer toward a better destiny.

Make tough, informed decisions; hold yourself and others accountable; and together we will write yet another successful chapter in our history.

I am proud to be with you in the reconstruction of a great Chrysler.