Chrysler will double planned stock buyback Carmaker to also boost dividend by 14 percent as 1996 earnings soar

December 06, 1996|By BLOOMBERG BUSINESS NEWS

AUBURN HILLS, Mich. -- Chrysler Corp. said yesterday that it will double its planned 1997 stock buyback to $2 billion and JTC boost its dividend by 14 percent. The moves underscore the automaker's robust performance and continuing optimism despite signs of an industry slowdown.

Chrysler's focus on high-profit minivans, pickup trucks and sport utility vehicles has allowed the company to post record earnings this year. Its sales are up almost 14 percent, far outpacing the industry's 2.4 percent gain.

The success has enabled Chrysler Chairman Robert Eaton to keep his pledge to return excess cash to shareholders, made when the company was fighting off a takeover bid by its largest shareholder, Kirk Kerkorian, in April 1995.

Since then, Chrysler has increased its dividend four times and purchased $3 billion worth of its stock.

"The unique, outstanding management of Chrysler has moved it to the forefront of the industry from every important criteria," said Seth Glickenhaus, who, together with his clients, owns 10 million shares of Chrysler's stock.

Investors hailed yesterday's announcement, pushing the automaker's stock up 87.5 cents, to $35.875, just 50 cents off its record high.

Chrysler's return on its shares in the past year stands at a lofty 43.6 percent, well above Ford Motor Co.'s 18.1 percent and General Motors Corp.'s 18.7 percent.

Chrysler also was expected to announce that Robert Lutz, president and chief operating officer, will give up some of his day-to-day responsibilities. Lutz, 64, has had a key role in Chrysler's resurgence, especially by pushing to focus on the high-profit truck market.

Analysts have been expecting Lutz to take a less active role at the company, but the size of the dividend and buyback came as a surprise to some.

Chrysler is "showing confidence about their near-term product prospects and their long-term cost structure," said Nicholas Colas, a CS First Boston analyst. He had expected a buyback of $1.5 billion from the previously announced $1 billion.

General Motors Corp., whose stock also is trading near record levels, is expected to follow suit next month with an estimated $3 billion buyback program.

Some companies are financing buybacks with debt, but Chrysler said it will pay for its shares with cash generated by its strong sales. The company had $7.49 billion in cash at the end of the third quarter.

Chrysler's dividend increase will take its annual payout to $1.60 a share from $1.40. The new quarterly dividend will be 40 cents a share, up from 35 cents, and will be payable Jan. 15 to shareholders of record Dec. 15.

Pub Date: 12/06/96

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.