Business ups and downs: a newspaper demise, TV gold mine, Chrysler outlook; Chrysler: little profit may go long way
Chrysler Corporation has finally hit pay dirt -- of a sort. After losing some $3 billion in nine consecutive quarters, the company reports an $11.6 million profit in the second three months of the year, ending June 30. It does notm mean, however, that the company will be in the black for the year.
What the long-troubled automaker hopes is that the speck-size profit will attract more buyers into its show- rooms and help to reverse a persistant image of a company on the edge of collapse.
Arvid Jouppi, a stock-market analyst with John Muir & Co., figures the Detroit automaker will lose between $225 million and $235 million in 1981, although it could make up to $100 million in the last three months of the year after its new-model cars hit the road.
The outlook for 1982, according to Mr. Jouppi, is brighter than it has been for a long time.
Among the plus signs:
* Chrysler has a line of new products scheduled for the showrooms over the next several years, including an extended line of K-cars in the fall, a convertible in early 1982, as well as its own mini-pickup truck, a sports car, diesels, and more.
* Chrysler is adding new dealers at a fast pace, including some high-volume, major- brand dealers, such as Smyly Buick in Malden, Mass.
Reed Chessworth, head of Chrysler in New England, reports: "About 80 percent of all Chrysler-Plymouth and Dodge dealers in New England are now making a profit."
* The carmaker's deals with both its Japanese affiliate, Mitsubishi, and PSA Peugeot- Citroen of France could result not only in new engines but in new products as well -- cars that Chrysler does not have the financial and engineering clout to design and retool for by itself.
* Consumers may soon be in more of an auto-buying mood as interest rates show promise of falling by the start of the 1982- model year in the fall. Too, the decline in older-car upkeep suggests that more people may have a new car in mind.
Among the negatives:
* Chrysler dealers, because of the automaker's last-minute drive for a profit , are loaded with unsold cars. Thus dealers will be taking fewer cars in the third quarter, a historically bad period for the auto industry.
* Chrysler has cut its engineering force to a precarious level in order to reduce overhead -- from 5,000-plus engineers to fewer than 3,000.
The cut was far deeper than that by either General Motors or Ford. However, to maintain its engineering reputation, Chrysler can switch part of the engineering functions to the purchasing department and buy what it needs from, among others, Mitsubishi and PSA Peugeot-Citroen.
"I see Chrysler as well beyond the survival stage," asserts analyst Jouppi.
What gave Chrysler a big boost was the April 13 car-price increase by GM as well as the end of the rebates in March. Chrysler thus held on to its share of the retail market.
Manuel Pombo, owner of a Ford dealership in Meriden, Conn., says he hasn't been so excited about the automobile industry for years as he is right now. Mr. Pombo has just switched a second dealership in West Springfield, Mass., from Lincoln-Mercury to Chrysler.
Why the switch? "Because of the Chrysler product line," he responds.
Besides, he adds, Chrysler "has perhaps the best automobile man in the world as chairman of the board."
Indeed, Lee A. Iacocca, once fired by Henry Ford II as president of Ford Motor Company but highly respected in the industry, has done a remarkable job for Chrysler, including the $1.5 billion US guarantee that enabled the company to get the loans it needed to keep the assembly lines turned on. A tough and demanding administrator, he has instilled a new enthusiasm in the company.
While the second-quarter profit is insignificant overall, it is seen as highly important by the people who run Chrysler. Indeed, Mr. Iacocca has played the hard-won news with all the public-relations hype for which the auto companies have been known in their best days in the past.
Chrysler had expected to make a profit in the fourth quarter last year, and did, indeed, make a profit in October. However, with the sharp rise in interest rates, Iacocca's plans ran afoul and the red-ink bath continued. So to make good on his pledge of a second-quarter profit in 1981, Iacocca jawboned dealers into taking far more cars than they were scheduled to take -- and the dealers played along.
"Before the sprint I figured that Chrysler might lose perhaps $30 million in the second quarter," says Jouppi.
Chrysler Corporation, which in good times used to make about 5 percent net on car sales, may never again reach that level of return because it is a much smaller company today than before the crash.
Nonetheless, the company seems to be on the road bac k -- and all of the tires have air in them.