GM Net Drops 69.5%; Chrysler Reports Gain

General Motors reported a steep decline in its 1986 fourth-quarter earnings on Thursday due largely to the sweeping round of plant closings and layoffs of more than 29,000 workers announced in November.

A 69.5% drop in earnings by the nation’s largest auto maker contrasted with Chrysler, which reported a 50.5% earnings increase during the quarter. Chrysler also announced that Chairman and Chief Executive Lee A. Iacocca, 62, will stay on for another four years with a big bonus payable in stock.

Under the agreement, Chrysler’s board of directors said, Iacocca will receive 170,000 shares of Chrysler common stock, in staggered amounts. Measured at Thursday’s closing price of $50.25 a share, the stock would be worth approximately $8.54 million. He earned $1,617,455 in total pay in 1985.

While GM and Chrysler reported sharply different fourth-quarter results, both companies reported declines in net income for the year. Ford is expected to release its quarterly and year-end results later this month.

GM posted net income of $382 million for the quarter, down 69.5% from the $1.25-billion profit it reported in the fourth quarter the year before. The quarterly figure includes a $1.2-billion writeoff due to the plant closings to take place over the next three years.

Despite record sales and revenue of $102.8 billion in 1986 and all-time high earnings of $1.18 billion at GM’s financial subsidiary, General Motors Acceptance Corp., the No. 1 auto maker said its net income for the year fell 26.4%.

GM’s net income for 1986 totaled $2.94 billion compared to the $3.99-billion profit the corporation earned in 1985.

GM Chairman Roger B. Smith and President F. James McDonald said in a statement that the drop in profits was largely attributable to “the costs of establishing reserves for plant closings, sales incentive programs and the expenses associated with the development of new products and manufacturing systems.”

UAW Renews Criticism

The GM announcement prompted leaders of the United Auto Workers union to renew their criticism of GM’s executive bonus plan. In a written statement, UAW President Owen Bieber and Vice President Donald F. Ephlin warned that a “two-class compensation system in which executives reap huge rewards regardless of corporate performance while workers are penalized by low corporate earnings” will no longer be tolerated.

“In view of GM’s serious problems reflected in its earnings statement, it is not acceptable for corporate executives to continue to receive rich bonuses at the same time the workers are denied any payout from profit sharing.”

Chrysler made its announcements at a news conference in New York. Iacocca announced that the No. 3 auto manufacturer earned $323 million in the fourth quarter, up from the $215-million profit posted in the fourth quarter the year before.

For the year, however, Chrysler’s profits fell 14.2% with total earnings of $1.4 billion compared to 1985’s net income of $1.64 billion.

Situation at Chrysler

Analysts said that Chrysler’s reduced profitability in the face of record sales was due to higher labor costs and lost production when plants were shut down for retooling and modernization.

“Chrysler was the only one of the Big Three to negotiate a new contract with the UAW last year,” commented auto industry analyst David Healy with Drexel Burnham Lambert. “For the first time in a long while, they are paying wages and benefits on par with GM and Ford.”