Purchase of AMC a Factor : Chrysler Profit Up, but Layoffs Planned
Chrysler Corp. said Tuesday that its third-quarter earnings rose 7.6%, but the company also plans to lay off about 3,500 white-collar workers to cut costs after its takeover of American Motors Corp.
Chrysler said third-quarter earnings rose to $253 million or $1.15 per share, the third-best results recorded for the period, from $235 million or $1.06 per share in last year’s third quarter.
The company said worldwide sales in the quarter rose to $6.17 billion from $5.17 billion over the year-ago period.
The earnings were somewhat above the consensus of Wall Street analysts’ estimates. They had pegged the No. 3 auto maker’s net at about $1 per share. The latest quarter included the acquisition of American Motors Corp.
Chrysler Chairman Lee A. Iacocca cited several negative factors affecting the company in the latest quarter. Those included the $1.6-billion AMC acquisition; the $372-million purchase of Electrospace Systems Inc. of Richardson, Tex.; the purchase of NFC Leasing Inc. in Hinsdale, Ill.; a slump in industry sales, and a strike in Canada.
“We were still able to record one of the finest earnings periods in our history,” he said in a statement.
However, Iacocca confirmed earlier reports that the company will lay off about 9% or 3,500 of its salaried workers. Iacocca said the figure was “fairly accurate. It may be more.”
Chrysler currently has about 38,000 salaried employees, including some 5,800 who were added when the company bought AMC in August.
The cutbacks are part of an effort to reduce operating costs as the company accelerates its previously announced program for reducing its break-even point, Iacocca said.
Asked about the future of Chrysler’s aging Toledo, Ohio, Jeep plant, he said that the company would definitely close one assembly plant in its system. He said no decision had been made on which plant it would be.
Chrysler has recently been scaling back its forecasts for 1988 sales in view of an uncertain economic outlook and last week’s stock market collapse. Iacocca said Tuesday that he was uncertain on the outlook for U.S. vehicle sales, but added that dealers do not appear to be canceling orders for Chrysler vehicles.
Asked whether the company was reducing its forecast for car sales in 1988, the chairman said he was resisting such a scale-back.
Chrysler stock has lost almost half its value since its high point several weeks ago. It closed Monday at $23.75 after being battered along with shares of Ford Motor Co. and General Motors Corp. However, Tuesday it closed up 75 cents at $24.50.
Chrysler, which last year made $1.4 billion, had been considered the lowest-cost manufacturer in Detroit. But the AMC purchase increased its overhead dramatically with a large new white-collar force and four additional plants.
