Chrysler group posts profit for 2005, but outlook is mixed
DETROIT (AP) ” DaimlerChrysler AG’s Chrysler Group was the only U.S. automaker with a profitable North American business in 2005, but executives said Thursday that the division faces increasing costs and competition and will be seeking benefit cuts from its hourly and salaried workers.
Chrysler reported a profit of $1.8 billion for the year in the U.S., up 6 percent from the year before. The company said Thursday it plans to distribute profit-sharing checks averaging $650 to its hourly employees.
By contrast, there will be no profit-sharing at General Motors Corp. which lost $5.6 billion in North America last year, and Ford Motor Co., whose North American losses totaled $1.6 billion. Both Ford and GM lost U.S. market share in 2005, while Chrysler gained share on the strength of products like the Chrysler 300 and Dodge Magnum sedans.
But Burnham Securities analyst David Healy said Chrysler probably can’t expect those market share increases to continue this year. Sales of the Chrysler 300 are now down year-over-year, while sales of the new Jeep Commander fell by half between December and January.
Healy said that while Chrysler is introducing 10 new vehicles this year, smaller cars like the 2007 Dodge Caliber, which starts at $13,985, will bring in less profit than the company’s sport utility vehicles.
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“I think the squeeze is on,” Healy said.
DaimlerChrysler Chairman and CEO Dieter Zetsche said Chrysler is not immune to the problems that have plagued GM and Ford, including increasing costs for health care and fierce competition from Asian brands.
“It’s clear that cost pressure and competition will intensify,” Zetsche told investors in a conference call.
The division is asking the United Auto Workers to pay more for health care for active workers and retirees. The UAW has agreed to that change at GM and Ford but has made no similar promises to Chrysler. Chrysler President and CEO Tom LaSorda said Chrysler is sharing financial information with the UAW and expects to wrap up the financial review process in the next few days.
LaSorda added that a decision on whether to cut benefits for white-collar employees could come as early as March. Earlier this month, GM outlined a plan to cut white-collar pension and health care expenses and trim executive salaries.
Healy praised Chrysler’s steady improvements in North American productivity. The division has set a goal of taking 30 hours to produce each vehicle by 2007, down from 44.3 hours in 2001. But he said Chrysler is still producing more vehicles than it can sell and had to cut back on production in the first quarter.
Shares of German-American DaimlerChrysler dropped $2.26, or 3.8 percent, to $57.54 in afternoon trading on the New York Stock Exchange.