Chrysler Group’s Second-Quarter Profits Jump 22 Percent

Chrysler Group, the North American arm of Fiat Chrysler Automobiles, reported net income of $619 million for the second quarter of 2014, up 22 percent from Q2 of ’13. Net revenues on total vehicle sales were up 14 percent, to $20.5 billion. Much of the success can be attributed to strong sales of Jeep models, plus the Ram half-ton pickup truck and new models like the midsize Chrysler 200 sedan. However, Fiat Chrysler CEO Sergio Marchionne warned in an online conference call with analysts and reporters that he will not substantially increase Chrysler production in order to meet demand.

“We’re going to resist increasing capacity in any substantial way,” Marchionne said. “The downside in a downturn is much greater than the upside in an upturn.”

Marchionne is determined to avoid the pitfalls Chrysler faced during the 2008-09 economic recession, when the automaker all but completely halted production while clearing its inventory with huge price incentives. That problem was repeated in Western Europe more recently, with such automakers as Fiat caught between over-capacity and labor unions resistant to reductions in hourly workforce.

Adjusted net income for the first half of 2014 comes to $1.1 billion, up from $696 million for the first half of 2013. Net revenue for the half rose by $6 billion, to $39.4 billion, boosted by “increased shipments of vehicles such as the Ram pickup and the all-new Jeep Cherokee,” according to Chrysler’s press release.

Chrysler shipped 727,000 vehicles for the second quarter, and sold 723,000, increases of 10 percent and 12 percent, respectively, over Q2 ’13. The third quarter of ’14 will “be a cash-producing quarter again,” Marchionne said, because of “more cars, better pricing and lower costs.”

Despite the good financial results, a shareholder revolt has been brewing in Europe. While a majority of shareholders approved the merger last week, those who had opposed the tie-up have begun to unload their shares, driving down the value of the stock. Marchionne noted that the two automakers became a single economic entity at the beginning of the year. The Fiat Chrysler stock sell-off would affect the merged company’s status as a global automaker, he said, and damage access to global capital markets.

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