From July through September, Chrysler's revenue rose 13.5 percent to $17.6 billion. (Scott Olson / Getty Images)
Chrysler Group LLC posted a net profit of $464 million for the third quarter Wednesday, an increase of 22 percent year-over-year, but acknowledged that trouble bringing the 2014 Jeep Cherokee to market had hurt the company’s cash position.
CEO Sergio Marchionne, who three months ago said a successful launch of the crossover was essential to meeting the company’s financial goals for the year, told reporters and analysts Wednesday that stronger sales of Ram pickups and Jeep Grand Cherokees and higher transaction prices kept Chrysler on track.
“We have had production in terms of the launch of the Cherokee, and the results of those difficulties are reflected in the quarter,” Marchionne said during a conference call with industry analysts and reporters. “But from an overall performance standpoint, I am quite happy with what we got done. Margins are up.”
As a result, Chrysler affirmed that it still expects to make between $1.7 billion and $2.2 billion this year and end 2013 with positive free cash flow of at least $1 billion.
That is good news for Chrysler’s parent company, Italy’s Fiat SpA, which is still struggling with weak demand at home and declining sales in Brazil, another key market for the automaker.
Fiat SpA posted a worse-than-expected trading profit of 816 million euros (about $1.1 billion) for the quarter. Analysts had expected Fiat to earn about 915 million euros (more than $1.2 billion) from July through September. And it would have done much worse, were it not for Chrysler. Without the Auburn Hills automaker, Fiat would have lost 247 million euros (about $339 million).
A year ago, Chrysler posted a third-quarter net profit of $381 million on sales of 556,000 vehicles. It ended 2012 with a full-year profit of almost $1.7 billion and posted a $507 million profit for the second quarter of 2013.
From July through September, Chrysler’s revenue rose 13.5 percent to $17.6 billion as sales increased 8 percent to 603,000.
The biggest boost came from trucks. Pickup sales have been strong in the United States, thanks in part to a rebound in the housing sector.
Ram sales rose 23 percent in the third quarter, and automotive research firm Kelley Blue Book said Chrysler made more on each truck it sold. Ram buyers paid an average of $36,724 per truck in the third quarter, more than 5.3 percent more than a year ago.
“Strength in the Jeep, Dodge and Ram brands were especially critical to Chrysler’s sales increase since the Chrysler and Fiat brands each saw a slight decline compared to sales in third quarter 2012,” said Alec Gutierrez, an analyst with automotive research firm Kelley Blue Book. “The crossover and truck segments have been red hot through most of 2013 and with no sign of momentum slowing in either of these segments.”
The Cherokee was supposed to ride this wave, and the company’s failure to get the vehicle into showrooms this summer probably cost Chrysler many sales, especially since production of the Jeep Liberty — the vehicle it was supposed to replace — ended last year. It was an expensive mistake, and one Marchionne said the company will not make again.
“We were actually just naked for the whole of 2013,” he said, calling the Cherokee launch “painful.”
Chrysler ended the quarter with $11.5 billion in cash, down $11.9 billion from both the previous quarter and the third quarter of 2012.
Available liquidity, including a $1.3 billion revolving credit facility, totaled $12.8 billion. Free cash flow for the quarter was negative $343 million.
The company acknowledged that figure was affected by delayed shipments of the Cherokee, which went into production in June but is only now arriving at dealerships because of problems calibrating its new nine-speed transmission.