Chrysler Chalks Up Robust Third Quarter : Automotive: Lowered incentives and higher sales contribute to profit of $423 million, keeping two-year comeback rolling. Stock jumps $3.25.
Chrysler Corp. reported strong third-quarter earnings Thursday, attributing the gains to a trimming back of incentives offered to consumers, brisk sales of new models and the continued popularity of its minivans.
Sustaining a comeback that began two years ago, Chrysler earned $423 million, or $1.13 per share, in the three months ended Sept. 30. A year ago, it reported third-quarter net income of $202 million, or 62 cents a share.
Chrysler’s performance was better than Wall Street analysts expected and allowed the company to continue to gain market share. Its portion of the U.S. car and truck market is 14.5%, up from 12.7% a year ago.
“Its an absolutely stellar performance,” said Joseph Phillippi, analyst with Lehman Brothers in New York. The company’s stock soared $3.25 to close at a record $51.75 in New York Stock Exchange trading.
Chairman Robert J. Eaton said he was pleased with the results, particularly coming amid downtime for model changeovers and new vehicle launches. The third quarter is traditionally the weakest for auto makers.
“The strong performance is not a reason for us to get complacent,” Eaton said. “We have much more to do.”
Chrysler continues to improve its balance sheet by reducing debt and lowering its unfunded pension liability, which stood at $3.9 billion at the end of 1992. The firm’s credit ratings have been upgraded, which has lowered borrowing costs, and its pension plans could be fully covered by the end of 1994.
The auto maker attributed part of its earnings gain to “significantly lower” incentives for new car buyers. Analysts said Chrysler’s incentives averaged $775 per car in the third quarter, down from $1,050 in the previous quarter.
The reduced incentives reflected strong consumer demand for new cars, along with Chrysler’s modest inventories of 1993 models.
Chrysler reported improved sales of its Jeep Grand Cherokee and LH mid-sized cars--the Dodge Intrepid, Chrysler Concorde and Eagle Vision. Dodge Caravans and Plymouth Voyagers continued to dominate the minivan sector.
The company reported sales of $9.7 billion in the third quarter versus $9.2 billion a year ago. For the first nine months of 1993, sales were a record $31.6 billion, compared to $26.7 billion a year ago.
Chrysler lost $3.04 billion, or $9.07 a share, for the first nine months of 1993, largely due to a $4.68-billion onetime charge for retiree health benefits. It earned $367 million, or $1.08 a share, for the same period in 1992.
The third-quarter earnings included onetime gains of $109 million from the sale of its interest in Mitsubishi Motors Corp. and an income tax adjustment. In 1992, the company took a $79-million charge for restructuring its rental car company.
Still, Chrysler earned 87 cents per share on an operating basis, considerably higher than the 57-cent consensus estimate of Wall Street analysts.
“They are in great shape right now,” said Phillippi. “They are benefiting from the fact that they are almost solely a North American producer.”
Both GM and Ford, which have not yet reported third-quarter earnings, are being hurt by the sales decline in recession-wracked Europe.
Phillippi said Chrysler’s growth will continue, with strong sales likely for the new Dodge Ram full-size pickup and Neon subcompact. He said the company must continue improving its quality, which ranks below average, and avoid introducing new products that might disappoint investors.
