Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, February 8, 1991 TAG: 9102080114
SECTION: BUSINESS PAGE: A-7 EDITION: METRO
SOURCE: Los Angeles Times
DATELINE: DETROIT LENGTH: Medium
"The first quarter will make this look like child's play," Iacocca said, predicting huge operating losses throughout the domestic industry as war and the recession drive down production and sales.
Chrysler, in the long term the weakest of the Big Three U.S. car makers, apparently will be the only one to post a profit for the final quarter of last year. General Motors Corp. and Ford Motor Co. are expected to report enormous losses next week.
Investment analysts had predicted a small loss at Chrysler, but the auto maker said it earned $31 million in the October-December quarter, partly due to a $63 million gain from a major work-schedule change at a St. Louis factory.
Iacocca credited an ongoing cost-cutting program with putting the auto company "ahead of the curve" in coping with the downturn.
"We got the tourniquet on in time," he said. "Our competitors are just starting to cut costs. They're going to have to do it with a meat cleaver."
The quarterly earnings kept Chrysler profitable for the full year, with 1990 net income of $68 million. A year earlier, Chrysler took a big plant-closing writedown that gave it a $664 million fourth-quarter loss but a full-year profit of $359 million.
GM is thought to have lost as much as $1.8 billion in the fourth quarter, and Ford is expected to post a loss of $350 million to $470 million, according to analyst Maryann Keller at Furman, Selz in New York.
The chief difference lies not in success in the marketplace - where Chrysler's all-important trucks, Jeeps and minivans are slumping badly - but in carving costs out of the company.
Robert S. Miller, Chrysler vice chairman, said the company probably would have lost more than $1 billion but for the retrenchment it began 18 months ago. Chrysler says it has lowered its cost base by $2.5 billion annually.
John Casesa, who follows the auto industry at Wertheim Schroder & Co. in New York, said Chrysler's results validated its boasts about having slashed costs. Nonetheless, he predicted the company would lose $225 million in the first quarter of 1991. Ford will lose $100 million or more and GM at least $600 million, he said.
"It will be a bloody quarter," Casesa said.
GM announced its own retrenchment program this week, cutting its dividend by 47 percent, eliminating 15,000 salaried jobs and demanding $2 billion in price cuts from suppliers, among other actions.
Iacocca signaled that Chrysler's dividend might be next. The board of directors is to declare the quarterly dividend next month, and Iacocca said there will be "a big discussion" about whether to cut it.
by CNB