Chrysler Still Upbeat on $212-Million Loss
Chrysler Corp. reported a $212-million loss for the second quarter on Friday, but struck a more optimistic note than its U.S. competitors about the rest of the year.
Chrysler’s results, which were as expected, left the three U.S.-based auto makers with about $1.3 billion in losses for the April-June quarter, which in normal times is the strongest part of the year.
But heading into the third quarter, normally the weakest, Chrysler proclaimed that its big cost-cutting effort was complete and said the company was poised to show better results as car and truck sales strengthen.
“If the market continues to improve, we should be in pretty good shape in the second half of the year,” Chairman Lee A. Iacocca said.
Chrysler’s loss, equal to 95 cents a share, contrasted with a year-earlier profit of $180 million, or 81 cents a share. Sales came to $7.8 billion, off 12 %.
On Thursday, General Motors Corp. reported a quarterly loss of $785 million, and Ford Motor Co. said it lost $324 million, a considerable improvement over a first-quarter performance that was the industry’s worst ever.
The smallest and weakest of the U.S. auto firms, Chrysler is credited by analysts with moving sooner to slash costs and better weather a recession that hit the automobile industry much harder than expected.
Iacocca boasted that his $3-billion cost-cutting effort will bear fruit in the current quarter, when many plants are closed to retool for new car models and GM and Ford are expected to lose money again.
He also said Chrysler had stemmed an outflow of money, increasing cash on hand by $558 million from three months earlier. Still, its cash and marketable securities of $2.4 billion are down nearly $2 billion over a year’s time.
Analyst David Garrity of Nomura Research Institute in New York said the halt to the rapid cash drain and Chrysler’s continued heavy spending on new cars and trucks bode well for the company.
But its tardiness in replacing its mid-size cars and Jeep utility vehicles, to be remedied next year, has jeopardized its position and led to considerable criticism of Iacocca.
Chrysler’s debt has been demoted to junk-bond status by Wall Street, and the company has been scrambling to sell assets, notably its half-ownership with Mitsubishi Motors of an Illinois car factory.
More important, the recession undercut Iacocca’s long-running efforts to find a merger partner for Chrysler. Many believe that is the company’s only long-term chance for survival.
Given Chrysler’s claim that it has carved $3 billion of costs out of the company, “I’m surprised at how weak their (profit) margins continue to be,” Garrity said.
