Chrysler Posts 4th-Quarter Earnings, Thanks to a Sale : * Autos: The No. 3 American car maker nearly broke even in its ongoing operations. Still, 1991 looks like the worst year ever for the U.S. industry.
Chrysler Corp. on Thursday posted the U.S. auto industry’s first quarterly profit in a year, a sign that could point to a turnaround for the nation’s weakest auto maker, analysts said.
Chrysler’s $97-million profit in the fourth quarter, more than three times the level of the 1990 period, was aided by a one-time gain from the sale of a joint venture. But even without that gain, the firm nearly broke even, reporting operating losses of $30 million.
Wall Street, which had predicted the No. 3 auto maker’s performance, credited good management in the midst of a punishing sales slump made even more difficult by Chrysler’s dearth of freshly designed vehicles.
“To basically break even, given the slack industry volumes and the fact that they were deep into their new product development, is a superb achievement,” said Joseph Phillippi, who follows the auto industry for Shearson Lehman Bros. in New York.
Still, analysts said 1991 is likely to prove the worst ever for the U.S. auto industry.
The $97 million, or 33 cents a share, fourth quarter profit included a $127-million after-tax gain from the sale of Chrysler’s half-interest in Diamond-Star Motors Corp., a joint venture with Mitsubishi Motors. In the year-earlier quarter Chrysler earned $31 million, or 14 cents a share. Sales came to $8.2 billion, up 7.9%.
Net losses for the year, which included an accounting change in the first quarter, came to $795 million, or $3.28 per share, contrasted with 1990 earnings of $68 million, or 30 cents a share.
Analysts attributed Chrysler’s resiliency to cost-cutting programs that slashed away at its cost base and bureaucracy, leaving the company better able to weather the tenacious recession than its larger domestic rivals.
On Wall Street, Chrysler stock slipped 25 cents to $16.25 on Thursday, after surging early in the week.
Both General Motors Corp. and Ford Motor Co. are expected to report enormous losses next week, assuring that 1991 will be the most disastrous ever for the U.S. auto industry.
Analysts predict that GM, Ford and Chrysler will post combined losses of nearly $7 billion for 1991, dwarfing the industry’s previous record loss of $4.5 billion in 1980.
The U.S. auto makers, pointing to the massive losses over the last year, have asked Washington to ease requirements on fuel economy and safety and to impose stricter trade regulations on their Japanese competitors.
But many financial analysts believe that the industry’s dizzying decline has bottomed out, leaving auto makers leaner and meaner and poised to rake in huge profits when the economy recovers.
“Structural developments in the last few months convince us that there is no apocalypse now, but rather that the industry is adjusting to a market that has gone from being the world’s most profitable to its least profitable in a decade, and that a dramatic rebound in earnings will occur in the next upturn,” said John Casesa, an analyst at Wertheim Schroder in New York.
For Chrysler, turning a profit in 1992 will depend on the success of its long-awaited new mid-size cars, which will go on sale later this year, and the Jeep Grand Cherokee, introduced last month. The company said it expects to lose money in the first quarter as a result of heavy spending on its new models.
