DETROIT — Chrysler reported a $664-million loss in the fourth quarter Tuesday--its first loss in seven years--and sold its big Gulfstream Aerospace jet-making subsidiary to an investment group to raise cash to support its struggling auto operations.
Chrysler is expected to use the $825 million from the Gulfstream sale to fund its five-year, $15-billion new-product program, designed to keep the company competitive in the 1990s.
"That cash goes into the car and truck business worldwide, and that should make it clear where we intend to focus and where we intend to compete," Chrysler Chairman Lee A. Iacocca said at a news conference announcing the Gulfstream sale and the fourth-quarter loss.
Iacocca added that much of Chrysler's loss--its first since the fourth quarter of 1982--came as a result of big writeoffs of two under-used assembly plants in Detroit and St. Louis that were closed during the period. Chrysler lost $87 million during the three-month period on its continuing operations.
Seeking to put the best face on the bad financial news, Iacocca said the actions put Chrysler in a much better position to face increasingly stiff pressure from Japanese auto manufacturers during the next few years.
"We could have muddled through in 1989" by keeping the plants open longer, Iacocca said. "But we chose instead to get ready for the '90s.
"We are going after the Japanese head to head. We're ready to play against them with products, with service, with productivity, and now we think with a solid cost base."
Chrysler's renewed interest in focusing on the U.S. car and truck business seems to represent an admission of failure for its strategy of the mid-1980s, when the company used its enormous profits to diversify away from autos. A big piece of that strategy was its 1985 acquisition of Gulfstream for $637 million from investor Allen Paulson--who heads the investment group that has just bought the company back from Chrysler.
Now Chrysler is seeking to sell off most of its non-automotive acquisitions, including its big defense electronics subsidiary, Electrospace Systems, which is still on the market.
Tuesday was a big day for Paulson, who not only reacquired Gulfstream but, in a separate deal, also bought troubled Learjet Corp. for $60 million. Integrated Resources Inc., parent of Wichita, Kan.-based Learjet, filed for protection from creditors Tuesday under Chapter 11 of the federal bankruptcy code.
Most analysts gave Chrysler high marks Tuesday for recognizing the need to take immediate action to avoid a serious financial crisis down the road. Although they expect that Chrysler will report another loss for the first quarter of 1990, most forecast that the auto maker will be modestly profitable for the full year, with earnings of about $350 million, virtually the same as its earnings of $359 million for all of 1989.
"The management has made some quick decisions and shown some real flexibility," said Jack Kirnan, automotive analyst with Kidder Peabody. "And unless we get an absolute disaster in the car and truck business, I think the worst is behind Chrysler."
Chrysler's strategic change comes amid Detroit's worst slump since the recession of the early 1980s. Despite a mild sales recovery in January, the Big Three auto makers are pouring millions of dollars into rebate campaigns to slow the Japanese onslaught.
For Chrysler, the slump has taken on a special urgency; its position as the nation's third-largest auto company is at stake. In December, for the first time, both Honda and Toyota sold more cars in the United States than did Chrysler.
Chrysler passed both Japanese firms again in January, but many analysts believe that the firm remains far too dependent on its sales of minivans and Jeeps. The company now sells more light trucks and vans than it does passenger cars. The firm's passenger car lineup has not been fully competitive, either in the subcompact or full-size segments of the car market.
So Tuesday's effort at restructuring the company could mark the beginning of an aggressive effort by Iacocca to put Chrysler on a more stable course before his scheduled retirement in December, 1991.