Chrysler's Skid

Can General Patton help?

While the gasoline shortage and the economic slowdown have hurt sales for all the automakers, times have been particularly rough for the weakest of the Big Three, Chrysler Corp. After the company lost an unexpectedly large $53.8 million for the first quarter, Group Vice President Harold Sperlich admitted, "You cannot stand too many quarters like that and keep the company afloat." Some Wall Street analysts expect that 1979 losses will top last year's $204.6 million.

Chrysler's unit sales so far this year have dropped 13.4%. Stuck with the oldest plants and highest costs among the Big Three, the company is struggling to raise money for a fiveyear, $7.5 billion modernization program. Chrysler officials recently visited 81 banks in Europe and North America, drew $100 million from company credit lines and persuaded bankers to stretch out $302.6 million of debt due next year. Chairman John Riccardo had previously renegotiated a $567.5 million revolving credit agreement with the banks, sold off most of the company's foreign operations and raised $250 million from a public offering of preferred stock. Now there is little left to sell, and Moody's and Standard & Poor's downgraded the company's credit rating in April.

Riccardo, who will remain as chairman, is scheduled to be replaced as chief executive toward the end of the year by President Lee lacocca, but long lead times and lack of capital will prevent lacocca from making any significant product changes before 1982. So far his much promoted fiveyear, 50,000-mile protection plan has not done much to move Chrysler's top-heavy line of big cars out of the showrooms. Sales of the Omni and Horizon compacts have almost doubled since last year, but their production is limited because of a contract with Volkswagen, which makes the engine and produces only 300,000 a year.

Chrysler's frailty has earned it two dispensations. United Auto Workers President Douglas Fraser implied that he would not mount a strike against the company should contract negotiations fail in September. And Justice Department trustbusters gave Chrysler permission to buy prototype emission-control and seat-belt systems from General Motors at a big saving in research and development costs. Many auto industry experts expect that Chrysler will survive, but as a smaller, less competitive entity. The company's best hopes are that the Government would not allow the industry to be dominated by GM and Ford alone, and that lacocca somehow will improve the company's shabby planning and marketing. Says Sperlich: "We are looking to old General Patton to kick a lot of tail."

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