Chrysler, the No. 3 U.S. automaker, would be profitable on a net basis if it were not for the interest costs of loans remaining from its bailout, the automaker's chief executive said on Friday.
Sergio Marchionne, who heads both Chrysler and its controlling partner Fiat SpA (FIA.MI), also repeated that he expected Chrysler would launch an initial public offering in 2011 to cash out part of the stake held by a union trust fund.
Chrysler is set to report second-quarter results on August 9.
Marchionne, speaking to reporters after a Detroit Chrysler plant visit by U.S. President Barack Obama, said the automaker would have been profitable in the quarter if it had not been for the financing cost on its government loans.
Chrysler took $7 billion in government loans and another $5 billion in bailout and bankruptcy financing. Under the terms of its bailout it is not required to make payments on principal on the $7 billion U.S. Treasury loan until 2011.
"The only reason we are not making money on the net is that I pay interest on the borrowings I took from the government and I have money in the bank to cover that debt," he said. "Actually, against the Treasury we owe them nothing. We have enough cash to pay it all off."
"But you can't run a business without cash, so it's just a function of our capital structure. If we had taken those funds as equity as GM did, we would have been making money, net, right now," Marchionne said.
Marchionne said he expected Chrysler would be able to reduce its reliance on lower-margin sales of vehicles to fleet operators like rental car agencies as the U.S. market recovers.
"Hopefully in the month of July we will see the stronger market that is indicative of the rest of the year," he said. "We're making money and I'm happy."
