Chrysler profit means $1,500 bonus for employees
February 2, 2012
Chrysler Group LLC not only posted its first annual net profit since 1997 Wednesday, it earned enough money to keep its Italian parent from succumbing to the worst economic crisis to hit Europe since the Great Depression.
CEO Sergio Marchionne said all of Fiat SpA's net income this year came from Chrysler, and he warned the company's European employees that they need to do something to even out that equation.
"I certainly have no intention of supporting that nonsensical arrangement. That's the definition of what I call an unhappy marriage," Marchionne said during a conference call with analysts and reporters Wednesday. "So somebody better get off their butts and just step up to the grid, because we're not pulling the cart here."
Chrysler reported a net profit of $183 million for 2011. With Chrysler's contribution, Fiat SpA reported a trading profit of 2.39 billion euros ($3.2 billion) for the year — more than double the 1.12 billion euros ($1.4 billion) it earned in 2010. Without Chrysler, Fiat would only have made a trading profit of just over 1 billion euros ($1.37 billion), nearly 6 percent less than it did a year before.
Fiat is reeling from a deepening financial crisis in its home market. Italian automobile sales were down almost 17 percent in January, and most other European markets are also seeing significant declines as consumers hold off on big ticket purchases while their leaders grapple with a mounting debt crisis.
But Marchionne said that is only part of the problem. Fiat's European factories are also unproductive and inefficient.
"One of the things that we need to learn how to do is to effectively use these assets in a way that reflects the same level of dexterity and flexibility that we're currently getting out of the American production system," he said. "We cannot continue to subsidize a suboptimal, inefficient manufacturing asset based on the basis of ideology."
And he said Fiat cannot do that alone; it also needs workers to accept new, more competitive operating agreements like those the United Auto Workers negotiated with the company last fall.
As part of that agreement, UAW members will be getting profit-sharing bonuses of more than $1,500. Marchionne said Chrysler's salaried workers will also be getting bonus checks, but he would not say when or how much they will receive.
"This is a reward that you have earned," he said in an email to employees Wednesday, a copy of which was obtained by The Detroit News. "The more difficult the task, the more satisfying it is to overcome all obstacles. You have been to hell and back, and you defied predictions of our demise. Your efforts rewrote the history that so many naysayers had forecast."
Chrysler was bankrupt when Fiat agreed to take it over in 2009. Last year, the company not only paid back its debt to the U.S. and Canadian governments, but also earned an operating profit of almost $2 billion — its first since 2005, when the company earned an operating profit of $1.8 billion. It had not reported a net profit since 1997.
Chrysler's financial results were not reported separately after it merged with Germany's Daimler AG in 1998, and they were not reported at all following its sale to private equity firm Cerberus Capital Management LP in 2007.
"Chrysler is the surprising comeback kid — again," said analyst Michelle Krebs of Edmunds. "When Chrysler emerged from bankruptcy, there were plenty of skeptics, but the automaker has proven them wrong. Since detailing its plan for the future in November 2009, Chrysler has done everything it said it would, creating an impressive recent track record and providing confidence that it will meet its 2012 goals."
Marchionne said the company is approaching this year "with some degree of optimism," despite the growing malaise in Europe. The U.S. market is rebounding, and Chrysler vehicles, such as its all-new Dodge Dart, are positioned to grab an even bigger share of it in 2012.
He confirmed that Chrysler will add a third shift — more than a thousand workers — at its plant in Belvidere, Ill., to support production of the Dart and other vehicles based on the same platform. Those new hires will come in as lower-wage entry-level employees as provided for by the company's two-tier employment agreement with the UAW.
Wednesday's results also bring Chrysler's approximately 26,000 UAW members one step closer to receiving the other half of the bonuses they were promised for signing that contract. Workers already received $1,750 upon ratification; they will receive another $1,750 as soon as Chrysler posts four consecutive quarterly profits.
The company earned $225 million in the last three months of 2011, its highest quarterly profit since emerging from bankruptcy.
Chrysler was also profitable in the third quarter of last year. It posted a loss in the second quarter, but only because the company decided to pay back its loans to the U.S. and Canadian governments ahead of schedule.