Chrysler’s Earnings Report Takes Back Seat to Politics

Chrysler Chairman Lee A. Iacocca, frustrated by his inability to convince the public that he doesn’t plan to run for President, lashed out for the first time Wednesday at a group of political operatives seeking to advance his candidacy as a Democrat.

Iacocca made his attack at a press conference called to announce Chrysler’s second-quarter earnings. These were off 18.1%, a decline mostly attributable to seasonal plant shutdowns for retooling.

The Chrysler chief complained that the Committee to Draft Lee Iacocca, formed last week, is using his name to raise funds against his wishes. “I don’t think it’s fair to use somebody’s name and imply that he might be a candidate, and raise money,” Iacocca said in his first public comments on the committee.

Group Denies It’s Misleading Donors

“Maybe that gets started with $50,000, but once it builds to $500,000, it starts to take on a life of its own,” he said, “because then they can start buying names (of potential contributors), and then the more money they get the bigger the direct-mail campaign they can have. Pretty soon they would have a mailing list worth $10 million.”

An attorney for the committee denied that the group is misleading donors into thinking that they are contributing directly to an Iacocca campaign organization. “People are being told that the money is being raised to convince Iacocca to run,” said the attorney, who asked not to be identified. “There’s a great deal of sensitivity to the issue of telling people what the money is to be used for.”

Iacocca also revealed that he wrote to the organizers last week to ask them to stop but said they responded that they plan to continue their efforts on his behalf for the 1988 nomination.

He also denied once again that he has any plans to run for President but expressed bewilderment over the continued national interest in a potential Iacocca candidacy--and also over stories in the national media about problems he might encounter were he to run.

“There are no circumstances under which I would change my mind, and I’m going to leave it that way,” Iacocca said.

“I don’t know how else to say it; I’ve said it for a year now. But I’m not a candidate yet, and they (the media) are beating my head in about the excess baggage I carry. It’s incredulous, its two-and-a-half years to the election and somebody threw my hat in the ring and they are beating the hell out of my hat.”

Turning from his future to Chrysler’s most recent financial performance, Iacocca reported that the No. 3 auto maker earned $488.2 million in the quarter ended June 30, down 18.1% from last year’s $596.4 million.

Analysts agreed with Iacocca that the decline was caused mainly by a drop in car and truck production volume in this year’s second quarter due to the temporary shutdown of some plants for retooling. The heavy costs of offering discount financing and other sales incentives have also cut into profit margins at Chrysler as well as at other auto makers, they said.

But analysts expressed optimism about Chrysler’s outlook, especially since Iacocca predicted Wednesday that production schedules in the third quarter should be strong.

Iacocca also said that Chrysler has dropped its plans to make a “blockbuster” high-tech acquisition with a price tag in the $2-billion to $4-billion range. This relieved some earlier concern on Wall Street that such a deal might become a drain on Chrysler’s financial strength.

“Chrysler’s true earning power was understated by this report,” said Scott Merlis, an automotive analyst with Morgan Stanley. “Its margins could have been better if production hadn’t been down because of the plant conversions.”

By contrast, analysts expressed increasing concern over the poor earnings performance of the industry leader, General Motors, which on Wednesday reported a 15.7% drop in its second-quarter profit. The world’s largest industrial company said it earned $977.7 million during the period, compared to $1.16 billion for the 1985 quarter.

GM’s key problem, these analysts say, is its inability to control the huge costs of its automation and modernization programs.

“The major problem is on the cost side,” said Michael Luckey, automotive analyst at Shearson Lehman Bros. “I don’t think their expense controls are tough enough. They haven’t been tough enough on holding down fixed costs, and they are spending excessively on automation.”

Ford, is scheduled to announce its second-quarter results today.