Chrysler Group LLC, the automaker that topped its full-year operating profit forecast in the first half today, said it won’t increase its guidance until after the third quarter. Fiat SpA, which runs Chrysler, fell on the news.
Chrysler’s net loss narrowed in the second quarter to $172 million from $197 million (129 million euros) in the first three months of the year while operating profit rose 28 percent to $183 million. Through June, Chrysler’s operating profit reached $326 million, exceeding the automaker’s guidance that operating profit would be between break-even and $200 million.
While Chrysler and Fiat Chief Executive Officer Sergio Marchionne said it is “highly likely that both profits and cash flow” will be upgraded after the third quarter, he said he didn’t do it today because he wants to see how the redesigned Jeep Grand Cherokee sells and how the overall industry performs. Fiat shares fell 4 percent from their intraday high.
“The market was clearly looking for more,” Michael Tyndall, an automotive specialist at Nomura Securities in London, said in a telephone interview. He said investors may have expected that the full-year outlook would be increased today. “Marchionne did the exact same thing at Fiat where he said ‘I’m going to wait for Q3 before I’m actually going to make any changes.’ ”
Fiat SpA, which controls the U.S. automaker, fell 20 cents, or 2 percent, to 10.01 euros in Milan trading today. Fiat had gained as much as 22 cents before the Chrysler report.
Along with the operating profit projection, the automaker has said it expects to use $1 billion in cash in 2010. The company has forecast full-year revenue of $40 billion to $45 billion and $2.5 billion to $2.7 billion in earnings before interest, taxes, depreciation, amortization and other expenses.
‘Mathematically Impossible’
“It is mathematically impossible for us not to exceed the targets that we set out for 2010,” Marchionne said on a conference call with analysts and reporters. He also said 2011’s targets could be changed. “It is possible that we may be significantly ahead of plan.”
The title of Chrysler’s presentation even hinted at improvement: “Gearing up for a guidance upgrade.”
Second-quarter revenue rose 8.2 percent to $10.5 billion compared with the first three months of the year, the Auburn Hills, Michigan-based automaker said today in a statement.
