Traverse City Record-Eagle

Business

April 30, 2013

Chrysler 1Q profit falls 65 percent

DETROIT (AP) — Three Chrysler factories were slow to switch from old models to new ones, and that helped dramatically reduce the company’s first-quarter profit.

The Auburn Hills automaker said Tuesday that its net profit fell 65 percent from January through March, mainly because production didn’t keep pace with sales.

Chrysler freshened up the Jeep Grand Cherokee large SUV and its Ram heavy-duty truck for the new model year, and is replacing the Liberty midsize SUV with the all-new Jeep Cherokee. But the plants that make those vehicles were slow to crank out the new models.

Chrysler’s profit dropped from $473 million a year ago to $166 million. Revenue dropped 6 percent to $15.4 billion. Total inventory fell to 419,000 last quarter, enough to supply dealers for 66 days of sales, down from 73 at the end of last year.

Chrysler and other automakers book revenue when cars and trucks are shipped to dealerships. But while Chrysler’s global and U.S. sales rose 8 percent during the quarter, the slow plants drove shipments down 6 percent.

“We sold all the cars that we could potentially sell,” CEO Sergio Marchionne said Monday. “I did not build enough to replenish what we sold.”

Chrysler shipped 574,000 cars and trucks during the quarter, down from 607,000 a year ago. And the three vehicles that ran short are all high-price, big-profit vehicles.

Marchionne mostly blamed the decline on the end of production of the aging Liberty at a factory in Toledo, Ohio. That factory is being completely retooled to build the Cherokee, which will go on sale in the third quarter. With no production at the plant, Liberty shipments plummeted by 31,000 for the quarter.

The Toledo plant won’t be cranking out Cherokees until late spring or early summer because the company installed all-new equipment to produce a radically different vehicle built on car rather than truck underpinnings. The new Cherokee comes with a nine-speed automatic transmission instead of the Liberty’s four-speeds, and it has a high-tech all-wheel-drive system that automatically disengages two wheels when they’re not needed, in order to save fuel.

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