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Chrysler Profits In Q3

31 October 2011

As the end of the year is approaching it seems that the automotive market is seeing a glimmer of hope to salvage a mediocre year of sales. Two recent stories show a bit more optimism from a beleaguered industry in a flatter than expected year. First is that Chrysler has shown a Q3 profit, and the other comes from Ford, as they plan to increase production here in the U.S.

Chrysler

The Chrysler Group LLC has reported a third quarter profit of $212 million, which is a healthy increase over the $84 million lose of a year ago. This raises the company’s profit forecast for 2011 to $600 million and marks Chrysler’s first full-year profit since emerging from Chapter 11 bankruptcy in 2009.

Chrysler’s CEO, Sergio Marchionne is quoted as saying “In the third quarter, Chrysler Group achieved increased sales and positive financial results, totally in line with the plan we laid out in November 2009. And in October, together with the United Auto Workers, we crafted a solid four-year contract that will support us in our growth plans and significantly reward our employees for their contribution to the revival of Chrysler. This house continues to be fully focused on financial performance and making outstanding cars and trucks by fully leveraging its alliance with Fiat.”

Turning a profit this year is pretty big news for the boys at Mopar considering the generally down market and Marchionne’s demand to pay back federal bailout monies early. 2011 saw a new union contract along with the company’s revamping of vehicles like their top selling Jeep Grand Cherokee, Chrysler 200 and 300 models.

Chrysler sales were up 23.1 percent over the third quarter of 2010, and increased 26.1 percent for the first nine months of this year. Compared to the U.S. industry as a whole which saw a 6% Q3 increase and just 10.4% raise in sales, Chrysler has done well to be ahead of the market.

Part of this sales volume increase is due to the fact that the company has cut back on new car sales incentives, which, in turn has raised its average transaction price. Chrysler’s average incentive per vehicle is running at about $2,859 right now and this has contributed to their $13.1 billion in net revenue for the year.

Ford

Life at Ford seems good domestically as they sailed through union negotiations and sales are up 11.4% going into Q4. In fact Ford has plans to build about 11 percent more vehicles, boosting production to a projected 660,000 units in the fourth quarter. According to Ford, one third of the increase will be in cars, the remainder will be in pickups and utility vehicles.

Much of Ford’s production in other regions of the world will finish the year down as we approach the end of 2011. Vehicle assembly in the Asia-Pacific/Africa region will be reduced more than 10 percent to about 210,000 units. Ford production in Thailand has been greatly affected by large-scale flooding in the area.
The company is projecting it will lose 30,000 units due to the disaster.

Ending The Year

We still have time until the end of the year and all the domestic automakers are rolling out year end incentives to spur sales. According to Lacey Plache of Edmunds.com, “Loosening credit standards and low interest rates will provide extra motivation for many buyers to return to market in 2012. Some consumers will feel compelled to replace aging vehicles, while others, weary of the recession, may be triggered by an urge to spend. But the slow pace of overall economic recovery in the U.S. will keep sales growth at a moderate pace.”

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