Monday, May. 08, 1978

Chrysler Crunch

No shine on that quarter

The harsh winter and lower than expected new-car sales early this year hurt all of Detroit's automakers, but none more than Chrysler, which once again is awash in red ink. Last week, his newly styled hair showing more gray than usual, Chairman John Riccardo announced his company's biggest first-quarter loss in its history: $119.8 million.

Chrysler had problems on just about every front. Its car deliveries dropped 6.6%, partly because of recall problems with the new Dodge Omni and Plymouth Horizon subcompacts, and competition from Ford's new Fairmont and Zephyr compacts. Truck deliveries fell 20% as squabbles in Washington over new emission and safety standards delayed plant changeovers and production startups. Though the tide has turned -sales of cars and trucks rose sharply in April -Chrysler expects an "unusually long" plant closing for a retooling this fall to neutralize the gains. Unsmilingly, Riccardo predicted: "The last nine months of the year will be a break-even period."

This week Chrysler shareholders will vote on the company's ambitious plan to sell new shares. The aim is to raise some of the $7.5 billion that Chrysler intends to spend over the next five years for plant modernization and new-car development. That amount is more than double past expenditures, but Chrysler needs to invest big, partly to modernize plants and meet tough federal regulations on gas mileage.

Though many shareholders fear that the sale of new shares will dilute their stock, there are no easy alternatives for raising the money. Without new capital, even Chrysler executives concede, the baby of Detroit's Big Three faces a difficult future in a business where the giants are always spending small fortunes on new-car designs. qed

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