Chrysler Group LLC reported its first quarterly net profit since emerging from bankruptcy nearly two years ago, helped by a revamped lineup of cars and trucks as well as higher vehicle prices.
Chrysler's first-quarter net income came to $116 million, compared with a net loss of $197 million a year earlier, as revenue shot up 35 percent to $13.1 billion.
The company reported an operating profit of $477 million in the first quarter, compared with $143 million a year earlier.
Sixty percent of the company's sales in the first quarter came from its revamped lineup, including the Jeep Grand Cherokee. Average vehicle prices rose to $28,300 in the first quarter, from $27,300 a year ago.
Until now, Chrysler has posted a string of operating profits, but high interest costs on more than $7 billion in loans the company owes to the United States and Canada from its 2009 bailout have undercut its ability to post a net profit.
Chrysler's earnings kick off a week of big news for the automotive sector. Carmakers are due to report April U.S. auto sales on Tuesday, and General Motors Co will release quarterly earnings on Thursday.
Chrysler, which now operates under the management of Italian automaker Fiat SpA, is seeking a $3.5 billion term loan and $2.5 billion in bonds to refinance that debt, the company said on Monday.
Sergio Marchionne, the chief executive of Chrysler and Fiat, said the deal was close to being crystallized.
Chrysler also reiterated its full-year outlook, saying it aimed to post revenue of $55 billion and net income between $200 million and $500 million.
Marchionne has said the company would need to post a couple quarters of net income before an initial public offering, which could come this year or next.
Success is incredibly temporary, Marchionne told analysts and reporters on a conference call. The first quarter is done. We've got a lot of quarters to do.
Fiat shares rose to the highest level in more than three months after the Chrysler report.
Sales of Dodge-brand cars made up about 37 percent of Chrysler's sales in the first quarter, while the Jeep brand made up about 30 percent.
In the United States, the company's top-selling vehicles in the first quarter were its Ram pickup truck, the Grand Cherokee and the Chrysler 200 sedan. In Canada, top sellers were the Dodge Journey crossover, Grand Caravan minivan and Ram pickup.
Meanwhile, sales of Chrysler-brand cars fell 14 percent, despite renewed buzz for the flagship brand with a Super Bowl ad, bearing the tagline Imported from Detroit.
The figures underscore a key challenge for Chrysler: a lineup that skews toward larger vehicles -- risky at a time when fuel prices are jumping above $4 a gallon.
But crossovers -- or smaller sport-utility vehicles built on car-based platforms-- remain the dominant segment in auto sales and an area where Chrysler has made inroads with vehicles like its Dodge Durango, IHS analyst Rebecca Lindland said.
They can make money with this configuration and it works for them, Lindland said. We do have to watch them for fuel economy standards. They'll be heavily dependent on Fiat to provide some balance.
Chrysler executives said they were aiming for a 25 percent improvement in fuel economy in its fleet by 2014 and would shift toward four-cylinder gasoline engines and away from six- and eight-cylinder engines.
The company will begin production of a car that can get 40 miles per gallon in the fourth quarter, Marchionne said.
Chrysler may lose between 50,000 and 100,000 vehicles in 2011 as a result of the disruption of auto parts from Japan.
The drop in vehicle output from Japanese automakers may offer some opportunities for Chrysler to increase production to plug in supply gaps. But Marchionne said those chances would not affect the company's earnings projections.
The company also said on Monday that it would borrow $3.5 billion in a senior secured six-year term loan and $2.5 billion in secured bonds that will have eight- and 10-year maturities.
Chrysler plans to use the term loan, bonds and $1.27 billion in cash from Fiat to refinance its government loans during the second quarter.
The company also confirmed plans to secure a $1.5 billion five-year revolving credit facility, as sources previously told Reuters.
A refinancing deal would bolster Chrysler's balance sheet, making it more attractive in an IPO. The deal also paves the way for Fiat to take majority control of the U.S. automaker, which Chrysler said should happen by the end of the year.
Fiat currently has a 30 percent stake. Marchionne has said Fiat plans to exercise an option to buy a 16 percent stake in Chrysler for $1.27 billion during the second quarter, which will be used to refinance Chrysler's government debt.
Fiat expects to push its stake in Chrysler to 51 percent later this year, when Chrysler is expected to meet its last performance test set by the U.S. Treasury in 2009.
Once Fiat exercises the 16 percent option, the Italian company would likely have to fold Chrysler results into some of its accounts, Marchionne said on the conference call. The inclusion of Chrysler results would boost Fiat earnings, he added.
(Reporting by Deepa Seetharaman; Editing by Derek Caney, Dave Zimmerman and Matthew Lewis)