Chrysler profit quadruples to $473 million as U.S. sales rise

DETROIT -- Chrysler Group said its first-quarter net income quadrupled on surging sales as the automaker set a profit target of $1.5 billion for the year.

Chrysler earned $473 million in the January-March period, up from $116 million a year earlier. Revenue rose 25 percent to $16.4 billion as U.S. vehicle sales increased 39 percent, the company said in a statement today.

"It's fair to say that Chrysler is firing on all cylinders," Chrysler-Fiat CEO Sergio Marchionne said. "It's been a great quarter, and I think that the indications for the remainder of the year are absolutely positive."

The 2012 target of $1.5 billion in net income would far outpace the $183 million earned last year as Chrysler posted its first annual profit since its 2009 bankruptcy.

The earnings announcement follows disclosures Wednesday that Chrysler will let its operating agreement with Ally Financial Inc. expire in a year as the automaker negotiates with other banks for vehicle financing.

Interest expense

Interest expense on Chrysler debt in the first quarter fell 20 percent from a year earlier to $277 million. The company had $12.6 billion in debt at the end of the quarter.

In May 2011, Chrysler privately refinanced the debts it owed from its bankruptcy exit to the U.S., Canadian, and Ontario provincial governments. Its total debt dropped $700 million in the 12 months since March 31, 2011.

Chrysler said its worldwide vehicle shipments for the quarter reached 607,000, up 25 percent from the 485,000 units shipped during the first quarter of 2011. Its goal for the year is 2.4 million.

Worldwide vehicle sales increased 33 percent in the quarter to 523,000. The difference between shipped units and sold units is due primarily to vehicles it manufactures for other automakers, including parent company Fiat S.p.A.

Chrysler said its retail sales in the United States climbed 40 percent in the quarter, though it did not identify the total number of retail units sold. Industrywide U.S. sales of light vehicles this year have risen 13 percent through March.

Chrysler also said its international sales climbed 80 percent in the quarter to 67,000, including 18,000 Chrysler Group vehicles that were sold by Fiat.

Chrysler predicted it would end 2012 having shipped between 2.3 and 2.4 million vehicles, with net revenues of about $65 billion.

Ally deal

Chrysler said it told Ally that their auto finance operating agreement will expire on April 30, 2013. Ally, the former GMAC, has served as a primary lender for Chrysler since the automaker emerged from bankruptcy in June 2009.

Chrysler notified Ally Wednesday that it won't renew the agreement, according to regulatory filings from both companies. The pact required Chrysler to allow Ally to finance a minimum percentage of vehicles sold with subvented loans, which are made to consumers at below-market rates. Automakers pay lenders to make up the difference.

"I never historically believed that there was a requirement that we own a captive to support our manufacturing facilities," Marchionne said. "When we came out of bankruptcy in 2009, [an association with Ally] was the only way we could support our dealers in the US and Canada. I think its indicative of the willingness on our part to look at alternative financing."

Marchionne said Feb. 28 that Chrysler is negotiating with several banks about the third- largest U.S. automaker's financing needs. Chrysler generates more than $25 billion in auto loans annually, people familiar with the matter said in February.

Ally's agreement with Chrysler extends through April 2013 and has automatic one-year renewals, according to its annual report filed Feb. 28. Chrysler needed to notify Ally of nonrenewal before the end of this month, the filings show.

Subvented loans with Chrysler accounted for about 5 percent of Ally's total U.S. consumer originations in the first quarter, according to Ally's filing. The agreement does not cover other business Ally does with Chrysler dealers, such as wholesale financing, so-called standard rate financing for consumers and leasing, according to the filing.

"I can't afford to have an in-house [financing] solution. It's like going shopping and not having a credit card to afford the trip," Marchionne said. "Undoubtedly, I'll make less [money], but at least the industrial machine will not get polluted," with decisions based solely on the financial performance of a captive financing arm.

With an outside lender, "you can't get stupid, because no one will finance it. If you're trying to get straight and stop drinking, stop hanging around the bar," the CEO said.

Dart launch

Marchionne said the 2013 Dodge Dart was scheduled to begin production in Belvidere, Ill., on Monday. The compact sedan is based on the Alfa Romeo Giulietta platform, and is the first vehicle to come from Chrysler's tie-up with Italian automaker Fiat S.p.A.

"The geometry of that car is the best I've ever seen. The quality level is on par or even better than we've done with the Jeep Grand Cherokee," he said. "Industrially, I have no restrictions. I can make as many as the market calls for."

The 2013 Dodge Dart is expected to begin appearing in dealer showrooms by the end of June and will mark the first time Chrysler has had a compact sedan in the segment since the Neon ended production in 2005. The Dart's base price is $16,790, including shipping.

Bloomberg contributed to this report.

Editor's note: Annual figures for Chrysler's 2012 vehicle shipments are in millions. An earlier version of this story misstated the figures.