Slumping sales on some models and the cost of buying incentives drove Chrysler Corp.'s third-quarter profit down 35%, the company said Friday.
But the performance beat analysts' expectations and set the stage for what could be a promising end of the year and start to 1998, the auto maker and analysts said.
"The best is clearly yet to come," said Scott F. Merlis, president of Merlis Automotive International Inc. "In this quarter you had some seeds and costs for new products. In the future quarters, you begin to harvest some of the seeds."
Auburn Hills, Mich.-based Chrysler earned $441 million, or 65 cents a share, in the July-September period compared with $680 million, or 93 cents a share, a year earlier. Revenue fell to $13.2 billion in the quarter from $14.4 billion during the same period of 1996.
Wall Street analysts expected Chrysler to earn about 58 cents a share. Merlis said the earnings were better than analysts had expected because Chrysler managed some additional cost cutting.
Chrysler's U.S. vehicle sales fell 8% in the quarter, which contributed to the drop, the auto maker said. Sales of minivans and subcompact Dodge and Plymouth Neons in particular suffered.
The auto maker on Friday announced $1,500 cash allowances for Neons and up to $1,000 for minivans.
"I don't see incentives disappearing any time soon for anyone," said James P. Holden, Chrysler's vice president of sales and marketing.
But the incentives took their toll. Chrysler spent $1,140 per vehicle on incentives last quarter, compared with $685 per vehicle in the third quarter of 1996--a 66% increase.
"It was a poor quarter because of pressure on prices from the competition--higher incentives and higher marketing costs were the rule," said David Healy, an analyst with Burnham Securities Inc.
The increase in incentive spending accounted for 40% of the profit difference between the third quarters of 1996 and 1997, Chrysler officials said.
Chrysler, the nation's No. 3 auto maker, also said sales slowed as it prepared its factories for making the Dodge Intrepid and Chrysler Concorde mid-size sedans. The auto maker has high hopes for earnings from those two models, along with the Dodge Durango sport-utility vehicle.
Chrysler shares rose 94 cents to close at $35.38 on the New York Stock Exchange.