Chrysler Says Bye Daimler and Leaves it With $2 Billion First Quarter Loss

Daimler: Sorry dear Chrysler but this is it. I have sold you to the three headed dog Cerberus.
Chrysler: Its ok, Daimler dear I perfectly understand…and by the way would you be so sweet and take care of my $2 billion first-quarter loss?
Daimler: Ok dear but remember I have the good end of the deal, ok?
Chrysler: Of course dear…

The sale of Chrysler has ended up like a comedy skit. Reports have cited that CEO Zetsche is saddened by the split of DaimlerChrysler, saying that the Auburn Hills automaker did also contribute to Daimler and was not always reporting losses. But with the present $2 billion first quarter loss that Chrysler has reported, will CEO Zetsche still think better of Chrysler?

Despite the loss that Chrysler has again incurred it is still very positive that it will be able to break-even for the rest of the year. It can be noted that Chrysler has previously reported a $1.2 billion resulting from the restructuring program that the automaker is implementing. The said loss was reported last February 14, the very same day that CEO Zetsche has announced that Chrysler is up for sale.

DaimlerChrysler Chief Financial Officer Bodo Uebber has forecasted a $2.1 billion full-year loss for Chrysler that is before interest and taxes. The forecast was announced during a teleconference with reporters and financial analysts. However analysts have a different view and considered the forecast stating a big improvement in Chrysler’s earnings in the current quarter as well as the second half of the 2007 as too much to expect.

As a matter of fact, according to New-York based analysts Brad Rubin at investment bank BNP-Paribas, "I think that's overly optimistic. I think it's going to be very difficult."

It is no secret that Chrysler is depending on the rollout of new vehicles to increase its sales. To start off its recovery plan it has launched recently the Dodge Avenger sedan and will be introducing new minivans by fall.

Despite the first quarter losses that Chrysler has obtain, DaimlerChrysler’s net profit for January through March have double to $2.6 billion which simply shows a turnaround of its reviving Mercedes-Benz luxury car-making division not to mention the additional earnings that DaimlerChrysler gets from its holding in the aerospace company EADS.

Uebber said that company’s earnings for 2007 would be slightly above $9 billion that is before interest and taxes however the yearly net profit would still be undercut by costs related to Chrysler sale. And estimating those costs it will probably reach between $4 billion and $5 billion.

DaimlerChrysler the producer of top of the line Mercedes 240D parts has also announced that it will be selling an 80.1 percent stake in Chrysler’s industrial and financial operations to Cerberus Capital Management for $7.4 billion which will mostly go into Chrysler’s operations. The deal is expected to end in the third quarter.

Will Chrysler gain any benefits from the sale? Chrysler as a would-be privately owned business will be shielded from the impatience of the financial markets and on their focus on short-term results. But according to CEO Tom LaSorda despite the new benefits and advantages that Chrysler will obtain from its new owner, the company would still strive hard to improve its performance.

Chrysler has reported first quarter loss before interest and taxes compares with a $857 profit for the January-March quarter of 2006, before the continuously increasing gas prices began affecting the demand for its vehicles. Sadly for Chrysler that trend has continued in the quarter just ended resulting to an 8 percent decline in the sales of Chrysler, Dodge, and Jeep vehicles.