Chrysler loses $370 million in 2nd quarter of 2011 due to repayment of loans

Chrysler announced a net loss for the second quarter of 2011 for a total of $370 million compared to a net loss of $172 million during the same period in 2010. The loss was reported even as sales and market share increased in the United States and Canada.

Chrysler said that if it did not include the costs to refinance its debt and repayment of its loans to the U.S. and Canadian governments, it would have earned a profit of $181 million in the second quarter of 2011.

“There is no doubt that Chrysler Group has taken a huge step forward this quarter,” said Sergio Marchionne, Chief Executive Officer, Chrysler Group LLC. “Refinancing our debt and repaying our government loans six years early, reinforces our conviction that we are on the right path to rebuilding this Company and restoring it to its rightful place on the global automotive landscape.

Hit the jump for a memo sent by Chrysler and Fiat CEO Sergio Marchionne to Chrysler employees about the company’s second quarter earnings.

MEMO:

“When we first outlined our plans to get our financials back in shape and renew almost our entire product lineup within a very short period of time, many analysts and members of the press reacted incredulously.

“The second quarter of 2011 is now in the books, and we continue to confound the experts who were prepared to write us off. This was a historic quarter for Chrysler, one in which we repaid every cent of our taxpayer loans plus interest six years before they were due. In addition, we continued to improve our operational and financial performance, excluding one-time costs of paying back our government debt. We are continuing to establish credibility by fulfilling our commitments.

“In the preliminary results released today, we showed a Modified Operating Profit of $507 million in the second quarter, compared with $183 million in the same quarter last year. This brought our Modified Operating Profit for the first half of this year to $984 million. We had a net loss of $370 million in Q2, which included a non-cash, non-recurring charge of $551 million from the repayment of our government loans. Our adjusted net income was $181 million in the second quarter, compared with a net loss of $172 million in Q2 of 2010.

“Worldwide, we sold 486,000 vehicles in the just completed Q2, a 19 percent increase versus the second quarter of 2010. This improvement is directly related to the 16 new and significantly refreshed vehicles that we launched in 2010, many of them late in the year. Our sales growth is outpacing the market. In the U.S., our Q2 market share was 10.6 percent versus 9.4 percent in the same period last year. Canadian market share climbed to 14.9 percent in the second quarter, compared with 12.9 percent for Q2 in 2010.

“A series of refinancing actions in May allowed us to pay $5.9 billion to the U.S. Treasury and $1.7 billion to the Canadian government to repay the loans granted to Chrysler Group when it began operating as a new entity in June 2009. Marking Chrysler’s repayment, President Barack Obama visited the Toledo Assembly Complex, production home of the Jeep Wrangler, to thank employees for their efforts to revitalize the automotive industry. Chrysler Canada also held events to show our gratitude to Canadian federal and Ontario provincial governments for the support provided us to help survive and reorganize into a viable enterprise.

“In addition to repaying taxpayers, the second quarter was highlighted by the establishment of Street and Racing Technology — SRT — as a distinct company brand that will build on its identity for high-performance vehicles. We will launch three new SRT vehicles during the third quarter.

“We continue to invest in our business. In June, we announced a $114 million investment in new equipment at the Trenton Engine Complex, which will create an estimated 268 jobs and support increased production of the fuel-efficient Pentastar V-6 family of engines. We also fulfilled our commitment to invest $850 million in the Sterling Heights Assembly Plant and two nearby stamping plants as we held a groundbreaking for a modern new paint shop.

“Chrysler’s global alliance with Fiat has been solidified. Fiat’s ownership went from 25 percent to 30 percent in April when it met the second of three agreed-upon performance milestones. In conjunction with the repayment of Chrysler’s loans in May, Fiat exercised an option to increase its ownership of Chrysler by another 16 percent on a fully diluted basis. Last week, Fiat completed a deal to buy the U.S. Treasury’s remaining 6 percent equity and the Canadian governments’ 1.5 percent equity, ending government investments in our Company. This brought Fiat’s ownership of Chrysler to 53.5 percent.

“When the new Chrysler Group began operations 25 months ago, we were only a sapling in a forest of competitors. Trees grow because they try to get to the light and collect the sun’s energy. Each tree in the forest seeks to overtake its neighbors in order to reach stronger sunlight. In a period of just over two years, we have established solid roots and we have demonstrated the ability to move up. Without your contributions we would not have been able to write this remarkable story.

“But we can’t stay where we are. The challenge ahead of us is to continue to nurture our enterprise with the same attention to detail and high level of passion that we have brought to our endeavors so far. The alternative is to be left underneath the canopy of the forest, overshadowed by the competition.

“Let’s all continue to reach for the sky.”

– By: Omar Rana

Source: Chrysler, Free Press