Outlook for New Chrysler Continues to Improve

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Researched by Industrial Info Resources (Sugar Land, Texas)--The Chrysler Group LLC (Auburn Hills, Michigan) has been the third wheel of the American automotive sector for decades. Overshadowed by its much larger U.S. competitors, General Motors Company (NYSE:GM) (Detroit, Michigan) and Ford Motor Company (NYSE:F) (Dearborn, Michigan), Chrysler has struggled for years to make its place in the market. The increased presence of the foreign automakers in North America has further marginalized Chrysler in North America. However, following its bankruptcy in 2009, Chrysler has revived itself thanks to the efforts of its new owner, Fiat SpA (PINK:FIATY) (Turin, Italy), and things have begun to look up around the Auburn Hills, Michigan, headquarters of this storied icon of the automotive sector.

Chrysler has posted a profit for the third quarter of 2011, which is only the company's second profitable quarter since 2006. Reporting a quarterly net income of $212 million, Chrysler indicated that its sales had increased by 24% worldwide and that revenue was up 19% to $13.1 billion. Last year during the third quarter, Chrysler was in a significantly different position, losing $84 million and struggling to make the sales necessary to move forward to dig itself out of the hole caused by decades of poor management and bankruptcy.

Under the leadership of Fiat, Chrysler has made significant strides in turning itself around and, more importantly, has made great progress in erasing the stigmas attached to its brand. For years, questions of quality had hampered efforts to increase sales, but Chrysler has taken some significant steps to rectify this. The company has changed how it is manufacturing and testing its vehicles, adding several levels of testing that did not exist before. These efforts have been paying off with the vehicle-purchasing public. Chrysler's Jeep brand was recently named the top brand from a U.S. automaker in Consumer Reports' latest reliability rankings, and Chrysler itself was named the most improved brand overall.

While there is still a long way to go for Chrysler to return to true profitability, it is pulling out all the stops to achieve that key milestone. The automaker ended the first nine months of 2011 in the red by $42 million, mainly thanks to a $551 million accounting charge due to refinancing its governmental debt during the second quarter. However, Chrysler has increased its earnings forecast for the year to a profit of $600 million, excluding the accounting charge. Revenue for 2011 is estimated to reach $55 billion and Chrysler's share of the U.S. market is continuing to rise, reaching 11.6% during the third quarter.

Chrysler has also been taking the time to invest in its U.S. infrastructure after closing nonessential plants during its bankruptcy proceedings. The automaker just recently completed a $600 million expansion of one of its flagship assembly plants in Belvidere, Illinois, and is investing heavily in retooling and expansion of several other facilities in North America. Chrysler has allocated $850 million to retool its Sterling Heights, Michigan, assembly plant and an additional $365 million to expand its Toledo, Ohio, assembly plant. In addition, Chrysler is retooling a transmission plant in Indiana at a cost of $150 million, sending $72 million to expand a machining plant in Ohio, and investing $27.2 million on a retool of a casting foundry in Ontario.

Chrysler is already seeing the benefits of the moves it has made this year. The company's U.S. sales in October increased 27%, as the automaker sold more than 114,000 vehicles during that month, easily eclipsing the 90,000 sold during October of 2010. While it is certainly going to take some time for Chrysler to rebuild its image totally, the first steps have been positive, and the results speak for themselves. With the Japanese automakers facing significant supplier problems throughout 2011, Chrysler has been able to make significant headway in its efforts to recover in terms of both sales and market share. The automaker is poised to submit its IPO and return to Wall Street at some point in 2012, and momentum is working in its favor for the time being. The vehicle-purchasing public speaks with its wallets, and thus far Chrysler has been making all the right moves in its efforts to rebuild itself both internally and in the public's eye--efforts that are paying off in terms of profits and confidence that they can return to the greatness they once experienced.

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Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.