Chrysler Rides Out the Bumps

Chrysler will always be a boom-or-bust company.

--John J. Riccardo, President, Chrysler Corp.

On the surface, the principal accomplishment of the nation's third biggest automaker this year would seem to have been avoiding disaster. In the first quarter, Chrysler lost only $29 million, rather than the $40 million that Wall Street had anticipated. In June it rounded up $800 million of bank credit over a hectic weekend--just in time to quiet rumors that holders of short-term notes would push the company down the same road that the Penn Central followed. Last week it reported a third-quarter net of $1.1 million, off 71% from a year earlier; that left a loss of $20 million for this year's first nine months.

In fact, Chrysler's outlook has improved far more than these bumpy figures might indicate. Fourth-quarter sales are starting off stronger than at any time in Chrysler history and promise enough profit to haul the corporation into the black for the whole year. The company is now covering its costs well enough to make heavy repayments of short-term debt without drawing on its new lines of bank credit. Debt repayable within a year has shrunk from a mountainous $673 million last March to a manageable $369 million now.

Help from G.M. The 1971 model year looks like the year of the small car, and Chrysler is well positioned to catch the trend. In January, it will begin importing two minicars, the Japanese-made Colt and the English-produced Cricket. Added to the Valiant and Dart, which have captured 37% of this year's compact market, they will give Chrysler the broadest range of small cars offered by any U.S. automaker.

There is a strong element of luck in the turnaround. The strike that has shut down General Motors undoubtedly has helped Chrysler's fourth-quarter sales, and it will also prevent G.M.'s Vega from getting the long sales head start on the Colt and Cricket that once looked likely. The biggest reason for the improvement, however, is the aggressive direction that Chrysler is getting from the new management of President Riccardo, 46, and Group Vice President Eugene A. Cafiero, 44, who is in charge of auto operations. They took over in January, when former President Virgil Boyd moved up to vice chairman and Chairman Lynn Townsend relinquished control of day-to-day operations; Townsend now concentrates on long-term policy decisions.

Misplaced Faith. Riccardo and Cafiero inherited some staggering headaches. Costs were high. Some of Chrysler's cars impressed consumers as unimaginatively styled, and quality control had slipped. Worst of all, Chrysler was initially left behind by the market swing to small cars because it had placed an even more stubborn faith than G.M. or Ford in the idea that the American motorist's love for big cars would last forever. During the 1969 model year, only one of its eight plants could produce the compacts.

Riccardo, whose brusque manner irritates some subordinates, likes big cars --they are more profitable than compacts--but he has been realist enough to shift with the trend, as Townsend and Boyd had begun to do. By now, three Chrysler plants have been equipped to turn out compacts. Riccardo and Cafiero also launched a brutal cost-cutting program. Among other things, they cut white-collar employment by 3,500, to a total of 66,000, and eliminated 200 budgeted but unfilled managerial jobs. The new managers chopped $150 million yearly off total costs.

Cafiero has devoted particular attention to quality control. For example, he has standardized instrument panels so that workers can learn more easily to build them. He also tours plants to give what amount to pep talks. That sounds deadly, but the Brooklyn-born Cafiero talks the language of the football-loving auto workers. Instead of speaking about "improving productivity," for example, he talks about "going into the factories and teaching the guys how to block and tackle."

Late in Europe. The new managers readily acknowledge that they are a long way from solving all of Chrysler's styling, quality-control or sales problems. The company got into the European sales race late, and bought some troubled manufacturers--notably France's Simca and Britain's Rootes--largely because G.M. and Ford had plucked off the winners. Chrysler's recently unified operations in Britain, France and Spain are still running in the red.

At home, in any industry other than autos, Chrysler's sales of around $7 billion a year would make it a giant. In its own field, where it competes against companies that are twice and three times as large, Chrysler is highly sensitive to any changes in the volatile auto market. The ups and downs of demand that would only moderately affect G.M. or Ford stand out boldly in the profit-and-loss figures of the boom-or-bust company.

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