Chrysler May Post $1.20-per-Share Loss : Auto industry: The collapsing market and the bruising competition are blamed for the company’s expected report. Ford and GM are also expected to have lower fourth-quarter earnings.
Chrysler Corp., retrenching in the face of a slumping and bruisingly competitive auto market, is expected to report a large loss for the fourth quarter, its first since 1982, industry analysts said today.
They said Chrysler’s poor performance underscores the dreary state of the U.S. auto industry in 1989, a year in which sales--boosted by generous but costly incentives--were strong for much of the period but collapsed dramatically toward the end.
General Motors Corp. and Ford Motor Co., the other Big Three U.S. auto makers, also had a rough time and are expected to report lower fourth-quarter earnings, the analysts said.
They said Chrysler could report a loss of as much as $280 million, or about $1.20 a share, in the final three months of 1989, mainly because of more than $300-million worth of write-offs attributed to staff cutbacks and a plant closing.
“Chrysler will be several hundred million dollars in the red after the write-offs,” said independent auto analyst David Healy.
The company is expected to report fourth-quarter results on Feb. 13, and Ford and GM will report later that week.
The last time Chrysler lost money was in the fourth quarter of 1982, when it had a deficit of about $96 million.
Chrysler’s present difficulties have prompted some comparisons with its situation in the early 1980s, when it was struggling back from near-bankruptcy and the entire U.S. auto industry was mired in recession.
Analysts say that it is now a stronger company but that the auto market it faced in 1989 was one of the most treacherous in years.
The annual selling rate in December fell as low as 5.5 million cars, a level analysts consider recessionary.
Chrysler responded by drastically cutting production, temporarily closing 42 of 62 assembly plants in the United States and Canada in January alone.
At Chrysler, the anticipated write-offs are strictly accounting measures, and on an operating basis the company will probably break even or earn up to 9 cents a share in the last quarter of 1989, analysts said.
But this is a pittance compared to the $1.85 a share earned in the same period in 1988, or the $1.19 and $1.56 expected by Shearson Lehman Hutton analyst Joseph Phillippi for GM and Ford respectively.
Despite the expected losses, analysts say the write-offs are as well-timed as they could be, given the dismal state of the auto business. “1989 turned out to be a very difficult year. You might as well take as many charges as you can,” Phillippi said.
U.S. car sales bounced back in this month’s most recent period, but analysts remain cautious about the industry’s 1990 prospects, given the continued high levels of unsold cars on dealer lots.
