Continuing Slide

Company earnings tumble

Despite reports out of Washington last week that the economy grew modestly in the second quarter, American business leaders can see few signs to give them any cheer. Corporate earnings for the April through June quarter now being reported indicate that the period will be the worst for company profits since 1975.

One of the few bright spots last week was Chrysler Corp., which rented a ballroom at New York City's Waldorf-Astoria Hotel to announce that it had earned $106.9 million, its highest quarterly profit in five years. Even though its car sales had slipped slightly from a year ago, Chrysler made money because customers were buying more profitable big models with expensive options.

The news from companies that supply Chrysler and other automakers, however, remained gloomy. With steel industry plants running at only 50% of capacity, Armco, the fifth largest American producer, lost $57.4 million, and National Steel, the sixth largest, lost $49.9 million. Aluminum sales were also depressed, and Reynolds Metals saw profits tumble 44% to $25.5 million.

Since oil prices are still languishing below last year's levels, the profits of the major refiners kept slipping away. Texaco's earnings fell from $556 million to $305 million, and those of Standard Oil of Indiana dropped from $553 million to $382 million.

Among the airlines, Pan American World Airways reduced its loss from $112 million to $56.2 million, and Chairman C. Edward Acker predicted that the company would make a profit during the current quarter. Declining passenger traffic and cut-rate fares pushed income down for other carriers. American Airlines saw earnings tumble 98% to $466,000; Trans World Corp. posted a 27% decline to $41.6 million; UAL, Inc., parent company of United Airlines, suffered a 36% slump to $5.5 million; and Delta saw profits shrink 52% to $23 million.

Airplane manufacturers fared only slightly better. Lockheed Corp. managed to increase its profits 51% to $51.8 million, but that was partly because of money it had saved by discontinuing the L-1011 jetliner program. Northrop Corp. lost $1.6 million because of start-up costs for its new F-5G Tigershark jet fighter.

In all, U.S. companies in this quarter are expected to report profits that are about 20% lower than last year. Says Economist Otto Eckstein, chairman of Data Resources, Inc.: "We predicted bad results, but we've had to cut our forecasts back still further. Business should be a little better for the rest of the year, yet we expect that earnings will decline overall by 13% or 14%."

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