Chrysler Nets $31 Million in Fourth Quarter
Chrysler Corp. said Thursday it managed a slim profit in its fourth quarter to stay in the black for 1990, but Chairman Lee A. Iacocca said the reeling auto industry is taking a financial bath so far in 1991.
“The first quarter will make this look like child’s play,” Iacocca said, predicting huge operating losses throughout the domestic industry as war and the recession drive down production and sales.
Chrysler, in the long term the weakest of the Big Three U.S. car makers, will apparently be the only one to post a profit for the final quarter of last year. General Motors Corp. and Ford Motor Co. are expected to report enormous losses next week.
Investment analysts had predicted a small loss at Chrysler, but the auto maker said it earned $31 million in the October-December quarter, partly because of a $63-million gain from a major work schedule change at a St. Louis factory.
Iacocca credited an ongoing cost-cutting program with putting the auto firm “ahead of the curve” in being able to cope with the downturn.
“We got the tourniquet on in time,” he said. “Our competitors are just starting to cut costs. They’re going to have to do it with a meat cleaver.”
The quarterly earnings kept Chrysler profitable for the full year, with net income of $68 million. A year earlier, Chrysler took a big plant-closing writedown that gave it a $664-million fourth-quarter loss but a full-year profit of $359 million.
GM is thought to have lost as much as $1.8 billion in the fourth quarter, and Ford is expected to post a loss of $350 million to $470 million, according to analyst Maryann Keller at Furman, Selz in New York.
The chief difference lies not in success in the marketplace--where Chrysler’s all-important trucks, Jeeps and minivans are slumping badly--but in carving costs out of the company.
Robert S. Miller, Chrysler vice chairman, said the company probably would have lost more than $1 billion but for the retrenchment it began 18 months ago. Chrysler claims to have lowered its cost base by $2.5 billion annually.
John Casesa, who follows the auto industry at Wertheim Schroder & Co. in New York, said Chrysler’s results validate its boasts about having slashed costs. Nonetheless, he predicted that the company will lose $225 million in the first quarter of 1991. Ford will lose $100 million or more and GM at least $600 million, he said.
“It will be a bloody quarter,” Casesa said.
GM this week announced its own retrenchment program, cutting the dividend by 47%, eliminating 15,000 salaried jobs and demanding $2 billion in price cuts from suppliers, among other actions.
Iacocca signaled that Chrysler’s dividend might be next. The board is to declare the quarterly dividend next month, and Iacocca said there will be “a big discussion” about whether to cut it.
Meanwhile, the company is scrambling to limit the damage from a Consumer Reports magazine warning about one of its transmissions. Iacocca said he is dispatching Robert Lutz, president of the company, to meet with the magazine’s editors to clear up what he described as mistakes in the article.
