Auto forecasters were tossing their Ouija boards into the ashcan after Chrysler Corp. reported a $31 million profit in the fourth quarter of 1990.
The soothsayers had predicted up to a $200 million loss, but Chrysler credited a $3 billion cost-cutting program begun in 1989 for the modest quarterly profit and $68 million in earnings for the year.
"Even though the crisis in the Persian Gulf and a recession at home paralyzed sales in the fourth quarter, we managed to make a little money, no small accomplishment in these times," chairman Lee Iacocca said yesterday.
Chrysler earned 14 cents a share, and sales totaled $7.6 billion in the quarter, in contrast to a loss of $664 million and sales of $8 billion in the year-earlier period. Its yearly earnings translated to 30 cents a share, down from a profit of $359 million, or $1.55 a share, a year earlier. Sales totaled $30.6 billion.
Chrysler Financial, the firm's financing subsidiary, posted record earnings for the seventh year in a row, $313 million, up from $284 million a year ago.
"Incentives continued to escalate, plant operating costs went up, the union agreement added significantly to labor costs and price increases recaptured only a small portion of burgeoning costs," Iacocca said.
"But despite the negatives, our results are positive because of the cost-cutting program started back in mid-'89 when we saw economic trouble coming and started to reduce our costs. We did what we had to and are doing what we have to do to operate and survive," he said.
"Most analysts followed Chrysler's loss of production and not its drop in costs," said Thomas O'Grady, president of Integrated Automotive Resources in Wayne, Pa., an automotive research and consulting firm.
"Yesterday I would have estimated Chrysler's loss at 25 cents a share, and today they announce earning 14 cents a share," said independent Detroit analyst Arvid Jouppi. "It's like having a line with broken legs, a halfback with broken arms and still winning the game.
"Obviously, cost-cutting lowered the break-even point much quicker than expected," Jouppi said, adding that "Lee must be suppressing his glee, considering that S&P just downgraded Chrysler's debt securities rating."
Chrysler's earnings report comes only a few days after industry giant General Motors announced a five-year, $13 billion cost-cutting program, including a 35-cents-per-share dividend cut, white-collar layoffs totaling 15 percent of the work force, $500 million in annual capital spending cuts and elimination of executive bonuses.
Also, Ford Motor Co., which along with GM is expected to announce a fourth-quarter loss next week, said yesterday that while it would copy some of GM's cost-cutting measures, it had expenses under control.
"Cost-cutting isn't new to us," Alex Trotman, executive vice president of Ford's North American automotive operations, told a Chicago Auto Show luncheon.
"We've been on an efficiency drive for a long time to get more bang for the dollars spent. With the Persian Gulf and the recession, we've had to raise our sights higher, but we're on top of it," he said.
"The present political and economic environment has been trying and the impact greater than anticipated," Trotman said.