Chrysler’s 3rd-Quarter Loss Totals $82 Million : Autos: Although less than expected, the red ink almost assures that 1991 will be U.S. car makers’ worst.
Chrysler Corp., the smallest and weakest of the three U.S.-based auto makers, reported an $82-million loss for the July-to-September period Wednesday, indicating that it has weathered the third quarter far better than Wall Street expected.
But the loss--modest only by the standards of an industry that has been drowning in red ink the past year--leaves little doubt that 1991 will be the worst financial year ever for the domestic auto makers, exceeding 1980’s record loss of $4.5 billion.
Last week, General Motors Corp. and Ford Motor Co. posted combined third-quarter losses of $1.6 billion and offered a bleak outlook for the rest of the year, elevating concerns about the pace of the recovery. For the first nine months of this year, the Big Three have lost $4.9 billion, compared to earnings of $1 billion during the nine-month period last year.
Chrysler’s third-quarter losses compared to its losses of $214 million, or 95 cents a share, in the same period last year. Sales rose 15% to $7.5 billion.
An $81-million profit in Chrysler’s financial services operations and more sales of higher-profit cars and trucks--such as minivans, Jeeps and large cars--prevented the loss from being larger.
The third-quarter results, considerably healthier than Chrysler’s first- and second-quarter losses of $341 and $212 million, defied the cyclic pattern in which the third quarter is usually the weakest--as auto makers close plants to retool for the new model year.
Analysts credited Chrysler with moving to cut costs sooner than its domestic competitors but warned that cost cutting can go only so far.
“This shows that cost cutting helped Chrysler but, if sales remain weak, they’re going to have to continue to cut costs and at some point you’re cutting the bone,” said William Steele, an analyst at Dean Witter Reynolds in San Francisco.
Since vehicle sales and profits began to dry up in the third quarter of last year, GM, Ford and Chrysler have been cutting costs, snipping away at production schedules and eliminating white-collar jobs.
The auto makers have tried to lure consumers with costly cash rebate programs averaging $1,000 per vehicle. But nothing has been able to persuade consumers to buy.
Stagnating auto sales have helped fuel recent calls in Washington for tax cuts to stimulate consumer spending. Ford has said it will not turn a profit before the end of the first quarter of next year, and GM is not expected to show a fourth-quarter profit either.
Analysts said Chrysler may be the first to post a profit again. Its fourth-quarter statement is likely to be filled with one-time boosts, including about $300 million from a stock sale and $100 million from Tuesday’s sale of its half-interest in Diamond-Star Motors Corp. to partner Mitsubishi Motors Corp.
Voicing optimism about the company’s future earlier this month, Chairman Lee A. Iacocca struck a philosophical note: “We’re a cyclical business. Night does follow day.”
USF&G; Corp.: The giant insurer reported that it lost $25 million in the third quarter, saying its nine-month effort to cut costs has yet to take hold. The loss, which amounted to 44 cents per share, for three months ended Sept. 30 compared to a loss of $15 million, or 22 cents per share, a year ago.
Revenue fell 12.5% to $980 million from $1.12 billion.
Net income in the latest quarter of $10 million from the company’s property and casualty lines and $3 million from its life insurance business was more than offset by $38 million in losses from real estate and other investments and in non-insurance subsidiaries, the Baltimore-based company said.
Travelers Corp.: The Hartford, Conn.-based insurer reported a third-quarter profit of $65 million, or 60 cents per share, a sharp improvement from last year’s loss of $499 million, or $4.93 per share.
Premiums totaled $1.77 billion, down from $1.8 billion.
Last year’s third-quarter earnings were dragged down by a $638-million after-tax charge to cover anticipated losses from the souring real estate market. That charge dwindled to $31 million this year, contributing to the company’s improved performance.
Property-casualty personal lines posted third-quarter net income of $9 million versus a net loss of $18 million a year ago.
Property-casualty commercial lines posted net income of $60 million versus $34 million.
- Cigna Corp.: The Philadelphia-based insurer reported a $123-million profit, or $1.72 per share, for the third quarter. That compared to net income of $11 million, or 15 cents a share, for the same period last year.
The 1990 results were affected by several after-tax charges totaling $98 million.
Revenue for the third quarter was $4.5 billion, down from $4.7 billion last year.
Wilson H. Tyler, chairman and chief executive, said strong earnings were posted by the company’s employee benefits, pension and individual life businesses.
Sun Co.: The Radnor, Pa.-based parent of Sunoco and Atlantic gasoline brands reported a third-quarter loss of $436 million, largely because of one-time costs associated with a restructuring and discontinued operations.
The loss, equivalent to $4.11 a share for the three months ended Sept. 30, contrasted with earnings of $25 million, or 24 cents a share, for the year-earlier quarter.
Revenues for the quarter totaled $2.95 billion, compared to $3.28 billion for the third quarter last year.
Earnings, D6
Chrysler’s Cost Cutting Here are some major financial moves that Chrysler Corp. has made in the past few years to cut costs and raise cash.
In addition to the items listed below, the company has parts of its Acustar Inc. parts subsidiary and its Chrysler Financial Corp. operations up for sale.
There has also been speculation that Chrysler may sell its remaining 11% holding in Mitsubishi Motors Corp., its principal Japanese partner.
Gulfstream Aerospace Corp.: Chrysler sold the defense-oriented subsidiary in February, 1990, for $825 million.
Common stock: On Oct. 2, Chrysler began selling 35 million shares of common stock to raise more than $300 million.
Diamond-Star Motors Corp.: Chrysler on Tuesday sold its one-half stake in the Chrysler-Mitsubishi Diamond-Star Motors Corp. car assembly plant in Normal, Ill., for $100 million.
Cost cutting: The company has aggressively cut expenses aimed at carving $3 billion from its annual $26 billion in costs. About 3,000 white-collar jobs have been eliminated, travel has been restricted and job vacancies have gone unfilled.
Chrysler Corp. Third quarter Net income loss: ($ millions) 1988: 112.5 ‘89: 331 ‘90: -214 ‘91: -82 Revenue: ($ billions) 1988: 7.9 ‘89: 7.6 ‘90: 6.5 ‘91: 7.5 First nine months Net income loss: ($ millions) 1990: +37 1991: -892 Revenue: ($ billions) 1990: 23 1991: 21.1 Annual total Net income loss: ($ billions) 1988: 1.05 ‘89: .36 ‘90: .07 Revenue: ($ billions) 1988: 35.5 ‘89: 35.2 ‘90: 30.2 Source: Company reports
