The Good Times Return to Detroit

General Motors leads automakers back onto the road to profits

Up. That word has not been used around Detroit much since 1978, at least not when the subject was profits. Recession, imports, high interest rates and public disenchantment have battered U.S. automakers and their products. But better times have finally arrived--and in a very big way. General Motors, the world's largest carmaker, last week reported profits of $3.7 billion for 1983, almost four times the 1982 total. Ford and Chrysler will also report handsome earnings. When all the tallying is done, Detroit's Big Three will show profits of about $6.4 billion for last year, vs. losses of $4 billion in 1980 and $1.2 billion in 1981, and a slight profit of $475 million in 1982. Only American Motors lost money in 1983, about $144 million.

The performances are giving Wall Street auto watchers something to shout about. "Super! Great! Beautiful! A hell of a job!" bubbled Michael Ward of New York City's Jesup & Lament Securities. The excitement was not over just the amount of profits but also how they were achieved: more efficient production with more automation, higher prices, lower costs, sharply reduced blue-and white-collar work forces. GM's earnings last year, for example, were about the same as in 1978, but with 1.7 million fewer vehicle sales.

GM was not ballyhooing its profits, because company negotiators are scheduled to sit down with United Auto Workers' officials this summer to negotiate a new contract. Increased profit sharing is expected to be an important U.A.W. demand. Under a 1982 agreement, the auto workers gave major wage concessions to GM and got back, in part, a profit-sharing program that will give $322 million to employees out of 1983 earnings. That comes to an average of $640 for each eligible worker.

GM's people made out better than most in the industry's turnaround. Chrysler, with its U.S. Government-guaranteed loans paid back ahead of time and sales zooming, will resume paying dividends on its common stock in April, the first such payout in five years. As part of the Washington bailout, Chrysler workers were given stock in return for wage concessions. Since the average worker now owns 159 shares, the 150-a-share dividend will mean about $24 each for 68,000 Chrysler employees. Chairman Lee A. Iacocca, with as many as 565,000 shares, will be a particularly big winner: an estimated $85,000 in dividends.

Other middle and top managers in Detroit are gaining handsomely. Some 5,800 GM executives will divide a bonus pool of $180 million, an average of $31,000 apiece. It will be the first GM bonus since 1979. Chairman Roger Smith's should bring his total compensation for the year to more than $1 million.

While Detroit liked 1983, this year should be even better. Sales in January, usually slowed by bad weather, were up 41% from a year ago. That pushed the sales rate on an annual basis to 10.25 million vehicles, and auto executives are saying that 1984 sales of 10.5 million cars are possible. Last October they forecast sales of only 10 million. Indeed, Detroit's carmakers could earn as much as $9 billion this year. Even AMC is anticipating that it will make money. Said GM's Smith: "Our recovery could be even stronger than we've predicted. We're on a roll in America, and it's up to us in the auto industry to keep it going."