Chrysler Group LLC says its financial performance exceeded its expectations and suggested an initial public offering could come sooner than expected.
CEO Sergio Marchionne told industry analysts Monday that if the company continues to perform at its present rate it will "blow the lid off" its previous guidance, but he said he was not yet ready to revise that forecast.
The Auburn Hills, Mich.-based automaker last month reported a net loss of $197 million in the first quarter. That was smaller than its net loss of $2.7 billion in the fourth quarter.
"We are going to continue to remain cautious," Marchionne said during a conference call on its first-quarter earnings.
Chrysler is forecasting annual revenues of $40 billion to $45 billion and an operating profit of break-even to $200 million. Chrysler had an operating profit of $143 million in the first quarter. Chrysler also affirmed its forecast of 1.6 to 1.7 million vehicle sales this year, up from 1.3 million in 2009.
Chrysler reported revenues of $17.7 billion and a net loss of $3.8 billion for the period from June 10, when it left bankruptcy protection, to the end of 2009.
Marchionne said he hopes the company will post an operating profit every quarter going forward. Marchionne wouldn't give any timing for an initial public offering to help repay about $15 billion in loans from the federal government, but said the company will act when it has shown it can make continuous improvement and when the market is ready.
"The fact we have gotten this far would suggest there's a strengthened base for us looking at an IPO much sooner than expected," Marchionne said.
Chrysler officials had said in November an IPO would be "highly unlikely" earlier than 2011. Chrysler has said it plans to fully repay the government by 2014.
Marchionne said the company may revise its financial guidance at the end of the third quarter after it sees how well the Jeep Grand Cherokee sells when it arrives in showrooms in mid-June. The company began making the sport utility vehicles in Detroit last weekend.
"The best of what Chrysler is today is reflected in that vehicle," said Marchionne, who also heads Italy's Fiat Group SpA.
It is the first new product rolled out since Marchionne and Fiat took control of the company when it emerged from bankruptcy protection last year. Marchionne said the company has made significant progress on a number of fronts, including lowering inventory and incentives, raising U.S. market share and improving vehicle quality. Chrysler plans to introduce 10 new or refreshed vehicles in the fourth quarter of this year, and Marchionne said major changes have been made to the cars' architecture and interiors.
"We were fully aware of what may have been perceived by consumers as major shortcomings in these cars," he said.
Chrysler said Monday that its inventory was 208,000 vehicles as the first quarter closed. That amounts to a 58-day supply of vehicles, which analysts say is about optimal to give consumers a wide selection but still avoid big incentives. Chrysler had 398,000 vehicles on hand at the end of 2008.
The company said it spent an average of $3,500 on low-interest financing, rebates and other incentives in the first quarter of 2010. That is down from $5,000 per vehicle a year ago.
Chrysler must continue to make sure it manages inventory so it doesn't have to return to aggressive discounting, Marchionne said. The company has assigned one person on its management team to monitor incentives to make sure the company doesn't resort to its old ways.
Marchionne conceded that many of Chrysler's first-quarter sales were to daily rental, government and corporate fleets, which are generally less profitable. But he said Chrysler's fleet sales were in line with General Motors Co. and Ford Motor Co., and that Chrysler expects to depend less heavily on fleet sales as its new products come out.
Chrysler's U.S. market share rose to 9.2 percent at the end of March from 8.9 percent at the end of last year, according to Autodata Corp. That was down from 11.2 percent in the first quarter of 2009. But Marchionne said the company will resist resorting to discounts to chase after market share.
"Market share which is unprofitable is irrelevant," he said.