Cherokee Delay Cuts Into Chrysler Profits
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AUBURN HILLS — (WWJ) While Chrysler posted a 22 percent profit increase in the third quarter, CEO Sergio Marchionne says they could have done better with a flawless launch of the important Jeep Cherokee mid-size SUV.
“We have had production issues in terms of the launch of the Cherokee,” Marchionne told reporters and analysts. “The results of those difficulties are reflected in the quarterly earnings.”
Chrysler earned 464 million dollars in the third quarter. It was the ninth quarterly profit, for Chrysler, which has earned $1.1 billion in the first nine months of the year.
“From an overall performance standpoint, I’m happy with what we got done,” said Marchionne.
But the quarter ended with 30 thousand Cherokee’s sitting in parking lots near the Toledo Jeep Plant, as Chrysler worked out issues with the vehicle’s complex 9-speed automatic transmission. At the same time, dealers clamored for a mid-size SUV, as the Jeep Liberty went out of production a year ago.
“We were actually just naked for the whole of 2013 in what I consider to be a relatively important market.”
Chrysler had to shut down the Jeep plant to retool for the Cherokee. However, Marchionne said Chrysler will find a better way to do this next time they update an important product.
“We should have found a more intelligent way of double timing the presence of the SUV by continuing to produce the old one.”
With Cherokee’s now available, Marchionne says Chrysler could sell a million Jeep’s next year.
Meanwhile, Marchionne said that it now appears that Fiat and the UAW won’t be able to agree on a price for the 41.5 percent stake in Chrysler now owned by the UAW retiree health care trust. That would mean an initial public offering of stock.
Marchionne said he’d like to execute that IPO before the end of the year.
It is possible that renewed negotiations could lead to a deal, but Marchionne said he didn’t feel that was likely.
The Jeep and Ram brand have helped push Chrysler sales up eight percent globally in the third quarter, with much of that increase here in their home market.
“Chrysler’s U.S. sales grew again in the third quarter and have now reached pre-recession levels,” said Kelly Blue Book analyst Karl Brauer. “The highly profitable Ram division is driving much of this growth, with sales and transaction prices up. Jeep is another bright sport, with the Grand Cherokee and Wrangler both contributing to higher transaction prices and increased profit. The division’s momentum will continue when the all-new Cherokee hits dealerships in Q4.”
But, says Brauer, Chrysler does face some risks going forward.
“The company’s market share remains flat and additional growth is hindered by a lack of new product for the Chrysler and Dodge brands. A redesign of the Chrysler 200 and Dodge Avenger is long overdue and necessary before the automaker can tap into the high-volume, and highly competitive, midsize sedan market. Parent company Fiat continues to face challenges in Europe, impacting product development for these and other critical models.”