Chrysler's Troubles (Contd.)

The troubled Chrysler Corp. last week was hit with lawsuit No. 7 stemming from the conflict-of-interest charges that brought on the firing of President William C. Newberg last summer. This suit came from Jack W. Minor, a Chrysler marketing director ousted when it was found that, like Newberg, he had profited from ownership in the automaker's suppliers. And like Newberg (TIME, Jan. 27), Minor claimed that Chrysler had known about his relations with the suppliers, said he was a scapegoat for top company officials to cover up their own sins, and asked $200,000 for damages and money he said the company owed him. Chrysler snapped back that Minor's assertions were "not justified by the facts."

Four days after the Minor suit, Stockholder Sol A. Dann, the company's most persistent critic, revealed that Chairman Lester Lum Colbert's wife Daisy owned shares in Detroit's Dura Corp., a Chrysler supplier. Colbert admitted it, explained that she had owned 444 shares for a year at a cost of $6,800, made $2,900 profit when she sold early last year.

Market Problems. These family arguments were nowhere near as serious as the problems the giant corporation is facing in the marketplace. Its share of industry sales, 15% last year, has slumped to 11.2%. The slow sales have pushed its inventory of unsold cars to 185,000, about a 100-day supply when 30 to 45 days is normal. To curb this buildup, Chrysler has laid off 10,000 of its 70,000 hourly workers. In addition, 8,000 of the company's 30,000 white-collar workers are being fired, a permanent cut aimed at trimming as much as $60 million in salaries. Another cost-cutter: selling the company's three remaining executive planes.

While sales of all auto companies are falling behind because of the business turndown, Chrysler leads them down with a hefty 39% drop in mid-January under last year. What is worse, the models hardest hit are the very ones that were counted on for the best sales--Dodge Dart, Plymouth and Valiant. The Dart, a big reason for Chrysler's good year in 1960, is selling poorly this year. The new Lancer compact, sold by Dodge dealers, has not caught on.

Agonizing Reappraisal. The cost cutbacks signify an agonizing reappraisal of company thinking, recognizing that if Chrysler is not going to get its traditional 20% share of the market, it should cut costs to fit the share of the market it has. The man behind the cuts is Lynn A. Townsend, 42, whom Chairman Colbert brought in last month as administrative vice president from his job as vice president in charge of international operations.

Townsend came to Chrysler in 1957 with a financial background, looks at everything with a cold profit-and-loss eye. Since he is relatively new, he is not burdened by sentimental attachments, such as the awe accorded the highly respected engineering department. Past managements have let the engineers add features and gadgets to cars that put their prices above the competition. On taking over, Townsend reviewed the design of the 1962 cars and ordered changes to make them more competitive. He is also considering closing some of the old Detroit manufacturing plants and moving their operations to more efficient regional facilities, if necessary. Should Townsend succeed in putting the company back on a more profitable basis, he may be the man who finally gets the president's title.

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