Chrysler Helped by Lack of Overseas Operations

A year ago, most car company analysts believed that the key to big profits for large manufacturers was an abundance of overseas sales. That has turned out to be untrue for now. Chrysler posted record earnings, in part because its revenue comes mostly from the U.S. Its results prove that international operations are not what they were supposed to be.

Chrysler’s first-quarter revenue was $16.4 billion, up 25% from the same quarter a year ago. Net income rose to $473 million, up almost four times. Worldwide vehicle shipments were 607,000 in the quarter, up 25% from 485,000 a year ago. Worldwide vehicle sales for the first quarter totaled 523,000, up 33% from a year ago. Sales outside the U.S. were merely 67,000.

The key to Chrysler’s success was that U.S. market share increased to 11.2% for the first quarter, up from 9.2% a year ago, driven primarily by a 40% increase in U.S. retail sales.

Ford (NYSE: F) and GM (NYSE: GM) release earnings in the next several days. Overseas sales, particularly in Europe, will weigh their earnings down. Overall sales of cars of any brand are down by double digits there. A prolonged recession in Europe will hamper profits for several years. GM has started a struggle with unions and local governments to sharply reduce the size of its Opel unit. The battles’ violence will owe itself to the need for auto unions to take a stand so they will not be crushed as they were in the U.S. in 2008. Governments do not want to have increases in their unemployment levels because of large layoffs.

Chrysler has almost no sales in China either. Overall car sales for all manufacturers in the world largest, and up until recently the most attractive, market have stalled.

Chrysler’s owner, Fiat, has decided that the best way to move Chrysler cars into markets outside the U.S. is through the Italian company’s distribution channels. Chrysler can act slowly to set up its own networks, and even manufacturing, because of this. Its capital risk will be relatively small. This may be a restrictive path to market share overseas. As it turns out, the efforts of Chrysler’s rivals to hold and expand international sales have damaged them.

Douglas A. McIntyre

Sponsored: Find a Qualified Financial Advisor

Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes. Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests. If you’re ready to be matched with local advisors that can help you achieve your financial goals, get started now.