Chrysler CEO Says No Deal With UAW Trust
Chrysler Group LLC Chief Executive Sergio Marchionne said Wednesday there is no agreement yet for Fiat S.p.A (F.MI,
FIATY) to buy Chrysler shares owned by a United Auto Workers union trust and avoid a public sale.
"Today, I don't have a firm deal," Mr. Marchionne said during a conference call with analysts to discuss Chrysler's
third quarter results.
Chrysler on Wednesday said its third-quarter earnings rose 22% to $464 million, as demand for the company's pick-up
trucks and SUVs helped boost vehicle shipments, offsetting the delayed arrival of a new Jeep.
The No. 3 U.S. auto maker's latest results come as it prepares for an initial public offering of shares currently
owned by a UAW health-care trust. Fiat, which owns 58.5% of Chrysler, has been in talks to buy the UAW trust's 41.5%
stake without an IPO.
The positive results are likely to influence the value investors assign to Chrysler's stock as the company prepares
for next year's IPO. They could also play into negotiations between Fiat and the UAW trust over how to price the trust's
stake in Chrysler.
The trust is holding out for more than Fiat has offered in private talks. It demanded an IPO, hoping to get a better
value for its shares on the public markets. A higher market value, based on Chrysler's performance and outlook, weakens
Fiat's hand in negotiating for a lower price.
Chrysler, based in Auburn Hills, Mich., confirmed its full-year forecast for net income of between $1.7 billion and $
2.2 billion and global shipments of about 2.6 million vehicles. Net income for the first nine months of the year totaled
Chrysler reported modified operating profit totaled $862 million, up from $706 million a year ago. Revenue climbed 13%
to $17.57 billion.
However, delays in launching the new Jeep Cherokee, a compact sport utility, contributed to a $343 million cash burn
for the third-quarter, leaving the company with total cash reserves of $11.5 billion at the end of September.
Marchionne said Wednesday he expects the auto maker's cash flow will improve now that the Cherokee is hitting
"We expect the fourth quarter to be a phenomenally strong cash generation quarter," Mr. Marchionne said.
Chrysler's profitability is bolstering Fiat, which has been stung by Europe's economic woes. Fiat reported earlier
Wednesday a narrower net loss of 15 million euros ($20.7 million) attributable to the parent for the third quarter, and
lowered some of its targets for the year, partly blaming the strength of the euro against other currencies in markets
where it sells its vehicles.
Fiat said it expected group net profit for the year to range between EUR900 million and EUR1.2 billion. It previously
forecast a range of EUR1.2 billion to EUR1.5 billion.
Without profits from Chrysler, Fiat's Fiat Auto unit lost EUR247 million during the latest quarter.
Chrysler emerged from its federally-financed bankruptcy in 2009. The auto maker has reported monthly sales gains for
three-and-a-half years and said it sees sales growth for its products, such as the Jeep Grand Cherokee and its Ram
Worldwide vehicle sales were up 8% to 603,000 in the latest quarter, driven by a 16% increase in U.S. retail sales.
Chrysler executives have a lot riding on the success of the Cherokee, expecting it to help drive sales of 750,000
vehicles in the fourth-quarter. That's about 150,000 more than it booked in the just-ended quarter.
But the Cherokee, which started production in June, was held for shipment to fix a problem with the vehicle's new
nine-speed transmission. That left Chrysler with a plant cranking out Jeeps by the thousands each month on which it
wasn't able to book any revenue.
Chrysler didn't begin shipping the new vehicle until late this month, weeks after the close of the third-quarter. Auto
makers only book revenue once a car is shipped.
"The only negative number that I'm not totally happy with is that we weren't able to produce more cash," Mr.
Chrysler's U.S. market share slipped in the third-quarter to 11.2% from 11.3% in the same period a year ago.
This is the second time this year troubles launching new models have hurt Chrysler's earnings. In the first quarter,
delays in shipping two of the company's highest-margin vehicles, the Jeep Grand Cherokee and Ram pickup, contributed to
a 65% profit decline for that period.
Chrysler also has gone without a replacement for its discontinued Jeep Liberty for more than a year, and the empty
spot in its lineup created a revenue hole.
The company acknowledged such delays in an update this week to its IPO filing, in which it deleted an earlier
reference describing its product launches as "successful."
Chrysler instead said it has encountered challenges rolling out new vehicles, which it attributed in part to supply
constraints and its factories operating at capacity.
While the company has done a lot to improve the look and handling of its vehicles, the lineup still has a number of
models, including the Dodge Avenger and Chrysler 200 sedans, which are older and less competitive than those offered by
rivals in important market segments.
-Nathalie Tadena contributed to this article.
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