Cause for Cheer

Chrysler is back in the money

If it was not exactly a U-turn, it was a sharper swerve in the right direction than anyone could have expected in, say, 1980, when Chrysler Corp. set a record by losing $1.7 billion. Last week Chrysler reported profits of $170.1 million on sales of $10 billion for 1982, its first year in the black since 1977. Said Chrysler Chairman Lee Iacocca: "We are poised for what I think is a big turnaround as the economy turns around."

Chrysler managed to make money despite a recession-induced 7.9% drop in sales of its cars and trucks (from 1.3 million in 1981 to 1.2 million last year). The swing factor was $239 million from the sale last March of the company's Michigan-based tank division to General Dynamics. Chrysler continued to lose money on operations, but the $69 million operating deficit was such an improvement over the $555 million operating deficit in 1981 that it was cause for cheer. Except for a painful five-week strike at Chrysler's Canadian assembly plants last fall that cost the company $125 million, Chrysler would have made an operating profit.

In another positive bulletin issued the same day as the earnings report, the company's auditor, Touche Ross, said it was dropping its reservations about the automaker's status as a "going concern," which had hung over every statement of the company's earnings for the past three years. Said a jubilant Robert S. Miller, Chrysler's executive vice president of finance: "We've gotten our financial driver's license back."

That was no easy task. From 1978 through 1981, Chrysler lost a total of $3.4 billion, and narrowly avoided bankruptcy thanks to $1.2 billion in loans that it was able to get only because the Federal Government guaranteed their repayment. Since 1978, when he came to Chrysler after a falling out with Henry Ford II that cost him the presidency of Ford Motor Co., Iacocca has kept his company alive by radical surgery: he closed 16 of its 52 plants and slashed its work force from 151,000 to 85,000. As a result, barring strikes, Chrysler can now turn a profit by selling just 1.2 million vehicles a year. Before Iacocca, the company had to sell 2.4 million vehicles to break even.

The good news last week seemed to confirm Wall Street's vote of confidence in 1982, when Chrysler stock rose by a smashing 426%, from 3% a share to 17%. The latest report, however, had little effect on the stock, doubtless because security analysts had anticipated that the year would turn out as it did. Now they are waiting to see if the new cars Chrysler will begin selling this fall will enable Chairman Iacocca to complete his half-finished U-turn. This file is automatically generated by a robot program, so viewer discretion is required.