Chrysler Earnings Gains May Be Problem For GM & Ford

Chrysler Group LLC is profitable again and the report may be creating some envy for Ford Motor Co. (NYSE: F) and General Motors Corporation (NYSE: GM).  While Chrysler was in perhaps the worst shape of the Big Three, the numbers are resembling that of a real company again.  The auto giant reported that net income was $436 million in the second quarter, up a significant 141% over the adjusted net income of $181 million a year ago,  Revenue was up 23% from a year ago to $16.8 billion.

The auto giant reported that its modified operating profit rose to $755 million in the second quarter, up some 49% versus the second quarter of 2011.  Chrysler did end the quarter with less cash sequentially at $10.2 billion versus $11.3 billion in the first quarter, but its free cash flow was about $866 million while its net industrial debt was cut down to $432 million as of June 30 versus $2.1 billion a year ago and versus $1.3 billion at the end of this year’s first quarter.

Chrysler’s sales performance is coming in well also.  Global vehicle shipments were up 22% to 630,000 in the quarter and global vehicle sales rose 20% from a year ago to 582,000 in the quarter.  What was significant in the U.S. market is that the automaker said that its domestic market share rose by 11.2% for the second quarter versus 10.6% in the second quarter of 2011.  The U.S. gains came from a 32% rise in U.S. retail sales.

Here is Chrysler’s new guidance for 2012:

• Worldwide vehicle shipments of 2.3 to 2.4 million
• Net revenue of ~ $65 billion
• Modified Operating Profit of about $3.0 billion
• Net income of about $1.5 billion
• Free Cash Flow of about $1 billion

We would have been expecting that the ongoing weakness was going to create some weak sales results we will get to see on Wednesday.  Some research from last week showed that the auto sales in America are actually going well.  SIRIUS XM Radio Inc. (NASDAQ: SIRI) is the wild card here as it seems that many cars keep adding the satellite radio service to new cars to the point that it has raised its guidance.

JON C. OGG