Ford (F 0.60%) and General Motors (GM 1.20%) both posted strong second-quarter results last week from rising demand in the U.S. market. Both automakers make a bulk of their profit from full-size pickups, which continue to surge as pent-up demand unloads, thanks in part to an improving construction industry. The F-Series, Silverado, and Ram are up 22%, 24.7%, and 22.9%, respectively, this year through June. Even with success in the most profitable segment, Chrysler wasn't able to bring in as solid a quarter as its domestic rivals.
Results
Chrysler's top-line revenue for the second quarter was $18 billion, a modest increase of 7% from a year ago. Chrysler is the smallest of Detroit's Big Three automakers; this quarter, it trailed Ford and GM's respective revenues of $38.1 billion and $39.1 billion.
Chrysler's bottom line registered at $507 million for the quarter, a 16% increase from a year ago, and trailing far behind Ford and GM, who both brought $1.2 billion to their bottom lines in the second quarter.
What's impressive, though, is that all three domestic automakers were able to start winning back market share that had been in decline for decades. GM's market share has been flat for the year at 18.1%, but spiked in June to 18.9%. Ford improved from 15.7% last year to 16.5% this year, the largest gain by any full-line automaker. Chrysler had a slight increase over last year to 11.6%.
Chrysler's global vehicle sales were up 10% to 643,000 for the second quarter. June marked the company's 39th consecutive month of sales gains, following the industry trend of steadily increasing SAAR numbers. Chrysler is also managing its inventory well with its dealers' days of supply at 68 days through June – right on par with last year's 67 days.
Caveats
It's good to see Chrysler post its eighth consecutive quarterly profit, but there's definitely some downside to the report that Ford and GM didn't experience. Chrysler actually reduced its year-end forecast for net income from $2.2 billion to a range of $1.7 billion-$2.2 billion. It made the same reduction to its forecasted year-end modified profit, taking it from $3.8 billion down to a range of $3.3 billion-$3.8 billion.
"Chrysler Group is poised for a very strong performance in the second half of the year, with the new Jeep Grand Cherokee and Ram 1500 pickup earning best-in-class recognition, and the all-new Jeep Cherokee now rolling off the line," Chrysler Group's chairman and CEO, Sergio Marchionne, said in a press release.
Bottom line
That quote from Marchionne reminds me exactly why I'll avoid Chrysler as an investment if it indeed has an IPO. It's so reliant on two vehicles for so much of its profits, and its Fiat counterpart is still struggling in Europe. Sure, Ford and GM both make a lot of money from the F-Series and Silverado, but both are making huge strides in smaller vehicles. Chrysler hasn't been able to clone its rivals' success in fuel-efficient segments. Until it does, I'll stick with Ford and GM as my domestic auto investments while the industry continues its rebound.
