Chrysler Chairman Lee A. Iacocca, whose decision to shut Chrysler's aged Kenosha, Wis., assembly plant became a major political issue in the Wisconsin presidential primary earlier this month, said Wednesday that Chrysler will delay the closing until the end of the year to meet sharply rising demand for Chrysler's cars.
Chrysler will thus follow the lead of General Motors and Ford, which have already expanded 1988 production schedules because of the surprising resilience of domestic car sales in recent weeks.
Although it posted a lower first-quarter profit of $183.7 million on Wednesday--because of the one-time cost of closing several parts plants--Chrysler said its share of both the car and truck markets rose sharply during the first three months of the year.
Iacocca said Chrysler's first-quarter sales, buoyed by costly rebates and other sales incentives, were the best in 15 years, while the company's truck sales set a record.
"The retail sales story is great right now . . . we grabbed market share," Iacocca said at a press conference. He noted that Chrysler's inventory of unsold cars fell from a 102 days' supply at the end of 1987 to just 64 days at the end of the first quarter.
As a result, Chrysler will add 110,000 units of production to its schedule for the second half of 1988, mostly at Kenosha and its Jefferson Avenue plant in Detroit.
Chrysler's decision to close the former American Motors factory in Kenosha, the oldest car assembly plant in the nation, touched off a firestorm of protest in Wisconsin when it was announced last January. Union and political leaders pressured Chrysler to reconsider, and threatened lawsuits against Chrysler for reneging on a pledge to keep the facility open for at least three to five more years.
Pressure Was a Factor
The Kenosha plant even became a cause celebre in the Democratic presidential race, when it moved to Wisconsin in early April. Leading Democratic candidates, including Massachusetts Gov. Michael Dukakis and Sen. Albert Gore Jr. (D-Tenn.), blasted Iacocca on the stump and in television commercials.
Iacocca, who has met with Wisconsin Gov. Tommy Thompson and Rep. Les Aspin (D-Wis.) to discuss Kenosha, said Wednesday that the decision to extend the plant's life was made largely because of increasing sales, but admitted that political pressure from Wisconsin had forced the company to take a second look at extending production in Kenosha.
Wisconsin officials seemed pleased by the company's decision. "We regard it as a positive announcement," said Jim Klauser, Wisconsin's secretary of administration. "The governor and Mr. Aspin met with Mr. Iacocca in February, and asked for more time before the closure, and Iacocca said he would take a hard look at that. . . . I think he has been responsive to the governor."
Still, Iacocca warned that Chrysler has no plans to keep the Kenosha plant open beyond 1988.
"It will only delay the closing . . . It will keep a whole work force through year's end, and then that's it."
Iacocca, unusually combative in his press conference Wednesday, also insisted that the United Auto Workers and the media had blown out of proportion Chrysler's proposed plans to shift some production of its aging K car line to Mexico next year.
The UAW, which is now in the midst of contract talks with Chrysler, has expressed outrage over Chrysler's proposed transfer of work to Mexico from American plants, which was revealed in the midst of the labor negotiations. Iacocca insisted that a final decision has not yet been made, but he added that if the shift is made, it would involve only a brief production run of the last K cars before they are dropped from Chrysler's lineup sometime next year.
He said Chrysler, which already builds some K cars in Mexico for the local market and export to the United States, is considering the move mainly because the American plants that currently build the cars are scheduled to shift to other work next year. As a result, the choice, Iacocca said, was between building the cars in Mexico or not building them at all.
"We do have a contingency plan to move the last of the K cars to Mexico . . . (a move) which could (last) all of five months."
But, "to say it's taking jobs away is erroneous, and we've got to stop this crap and get down to what the facts are," Iacocca complained.
UAW leaders, pleased that Chrysler seemed to be backing off somewhat on Kenosha and Mexico, still warned that the company has to learn that it can't drop bombshells, like Mexico, on the union and then expect peaceful contract talks.
"Labor relations with this management at Chrysler is worse than its been in 30 years," UAW Vice President Marc Stepp, director of the union's Chrysler department, complained Wednesday.