Correction to This Article
An Oct. 26 Business article incorrectly reported that in recent years Chrysler had embarked on a vigorous expansion of its plants to broaden the automaker's lineup of models. The new models were produced mainly by retooling the plants.

Overhauled Chrysler Boosts Profit For Quarter

Dodge Ram trucks, made by DaimlerChrysler, are displayed in Fairmont City, Ill.
Dodge Ram trucks, made by DaimlerChrysler, are displayed in Fairmont City, Ill. (By James A. Finley -- Associated Press)
By Sholnn Freeman
Washington Post Staff Writer
Wednesday, October 26, 2005

DaimlerChrysler AG said yesterday that its overall operations slumped in the third quarter because of a one-time gain last year but that its North American division surged, in sharp contrast to rivals General Motors Corp. and Ford Motor Co.

The German-American automaker reported that its net income fell 17 percent to $910 million in the third quarter, down from $1.1 billion a year ago. Its earnings were lifted last year by proceeds from the sale of its stake in Hyundai Motor Co.

The company's Chrysler division reported a $374 million operating profit, up 43 percent from a year ago.

The automaker's other automotive operations, including Mercedes-Benz, also reported improved operating profits compared with the corresponding quarter a year ago.

Both GM and Ford reported losses exceeding $1 billion in their North American operations in the third quarter. In response, the automakers announced plans for major restructurings and cost-cutting efforts.

Chrysler has already gone through a wrenching overhaul. In the past five years, Chrysler cut its workforce by more than 30 percent, from 126,000 employees to 86,000. The automaker closed seven factories, including a vehicle assembly plant in Canada, and sold 10 other manufacturing facilities. Both GM and Ford are reviewing their operations for plant closings and job cuts. Chrysler took steps to streamline its auto-parts buying process, an action Ford is undertaking now.

Chrysler has more easily weathered this year's downturn in large sport-utility vehicles than GM and Ford, which have many more plants devoted to building the vehicles.

Chrysler also had embarked on a vigorous plant expansion to add more vehicles to the automaker's slim U.S. lineup. Its recent hits include the Chrysler 300 and Dodge Magnum -- two large rear-wheel-drive cars. At the same time, new cars from GM and Ford struggled in the market. A big investment in updating its minivans also helped Chrysler.

Yesterday, the automaker confirmed that it will build the Dodge Nitro, a mid-size SUV similar to the Jeep Liberty, and the Dodge Caliber, a successor to the Dodge Neon. Two small, carlike SUVs from Jeep are also on the drawing boards. The Chrysler division includes the Chrysler, Jeep and Dodge brands.

Mike Jackson, director of North American vehicle forecasts at industry research firm CSM Worldwide Inc. in Farmington Hills, Mich., said the company's execution of new models is driving sales and profits.

"Going forward, they are going to be able to continue the momentum to be able to grow," Jackson said.

Chrysler's strength during a period of U.S. industry weakness is unusual. As the smallest of Detroit's Big Three, the automaker's profitability had been most susceptible to major swings in overall economic conditions. In bad times, Chrysler bled cash, impairing its ability to invest in new vehicles. Chrysler hit bottom in the late 1970s during an industry bust and required a government bailout. In 1998, the automaker merged with Daimler-Benz.


© 2005 The Washington Post Company