If you’re rooting for the continued revival of Chrysler Group, CEO Sergio Marchionne suggests you “just close your eyes, plug your nose and move on from here,” because the first quarter was a stinker.
Its net income was a mere $166 million due to the cost of launching the 2013 Ram Heavy Duty trucks and the 2014 Jeep Grand Cherokee, “as well as preparation for the second-quarter production launch of the all-new 2014 Jeep Cherokee,” according to a company statement. And modified operating profit was $435 million, down from $740 million a year ago.
Taking the trope down another path, Marchionne continued: “I knew I was going to be limping in the quarter. I didn't know that I was going to be limping that much,” Automotive News’ Larry P. Vellequette reports.
It didn’t help that Fiat, “excluding its 58.5% stake in Chrysler, lost 235 million euros ($308 million) for the quarter. It was the Italian automaker’s seventh straight quarter of red ink,” as Brent Snavely reports in the Detroit Free Press.
Switching to the hospital ward as a metaphorical aid, quoth Marchionne: “We tried the medicine, but the medicine, unfortunately, is killing the patient.” The euro is not presently competitive with other currencies, which makes it difficult to produce and sell cars on the continent, where new car sales have fallen for six consecutive years.
Indeed, the troubled market “is now dragging down even Volkswagen, the region’s leading automaker, as vehicle sales on the Continent have declined to their lowest levels in decades,” Bill Vlasic reports in the New York Times, noting that auto sales overall dropped 10% during the quarter, “including double-digit declines in France, Germany and Spain.”
No one is immune, Marchionne pointed out during his conference call with reporters and analysts, with a helpful reference to cookware. “Those who have claimed a Teflon approach are getting that coat taken off,” he said.
Which must hurt.
But in a rallying email to employees obtained by the Free Press’ Snavely, Marchionne invoked a phrase immortalized by the Institute of British Foundrymen during the Great Depression. He suggested that they not read too much into the unique results and keep their eye on the ball.
“This is a one-off event,” Marchionne wrote. “We are not backing off from our sales and financial goals for the full year, but we will need to be at the top of our game to reach these targets.”
That would be a profit of $2.2 billion on the production of 2.6 million new cars and trucks.
On Forbes.com, Dale Buss focuses on the negotiations for Fiat to buy the remaining shares of Chrysler owned by VEBA, the United Auto Workers’ retiree health-care trust: “We need to find a way to reconcile their expectations of value … which need to be realistic in view of market conditions,” Marchionne said. “If they are, then Fiat is willing to make an effort to close it up and move on from there.”
And “part of ‘moving on,’ Marchionne said,” and Buss reports, “is likely to be an initial public offering in the combined company. He said the companies have ‘gone through the initial beauty parade with a number of financial institutions who’ve shown interest in assisting Chrysler in hitting the market.’”
“Despite the differences on valuation, there’s no doubt about the outcome,” Reuters’ Rob Cox blogs, pointing out that Marchionne is the “son of Italian migrants to Canada” and “has long envisioned a fully integrated Fiat-Chrysler as the first step in a continuing consolidation designed to squeeze out the excess capacity that plagues the car industry, particularly in Fiat’s home market.”
And for all of the negative numbers for the quarter, analysts and observers generally shared Marchionne’s upbeat attitude.
“Chrysler’s ‘disciplined production kept inventory at a reasonable level,’ Richard Hilgert, an analyst for Morningstar Equity Research in Chicago, said in an e-mail,” writes Bloomberg’s Mark Clithier. “The results were in line with my expectations, maybe a bit better.”
And former deputy CEO Jim Press tells Bloomberg TV that “they have taken full advantage of a strong company that was in tough times,” in an interview before the results were released. “They’ve rebuilt it and the progress they made has been outstanding.”
“This quarter underscores the importance of an unwavering commitment to execute flawless vehicle introductions to reach our full potential. While the task ahead this year is daunting, we remain committed to our overall targets, including a minimum shipment increase of 8% and a modified operating profit of $3.8 billion,” Marchionne says in the official statement.
But given the telling lack of a metaphor, we strongly suspect that’s somebody in the press office saying that for Marchionne.