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Chrysler Chalks Up Its Best 3rd Quarter as Profit Soars 54% : Autos: The upbeat report is delivered as President Clinton visits Big Three country, touting the industry's turnaround.

October 12, 1994|DONALD W. NAUSS | TIMES STAFF WRITER

HIGHLAND PARK, Mich. — With President Clinton taking credit for the nation's economic revival in a visit to southeast Michigan on Tuesday, a Big Three auto maker provided solid proof of good times in the heartland.

Chrysler Corp. reported earnings of $650 million in the three months ended Sept. 30, compared to the $423 million it earned in the third quarter of last year.

The nation's No. 3 auto maker said the 54% jump in earnings--a record profit for the normally slow third quarter--reflects continuing strong sales of minivans, small trucks and cars, as well as lower incentives offered to consumers. Sales increased 21% in the quarter to $11.7 billion.

"The results were excellent," said Maryann Keller, an analyst with Furman Selz, a New York brokerage. "It's a story of a company managing its costs well and being the beneficiary of a robust truck market."

In the first nine months of 1994, Chrysler generated sales of $38 billion and earned $2.55 billion--more money than it has made during any single year in the past decade.

Despite the strong performance, Chrysler's stock moved up just 62.5 cents to $46.50 on Tuesday on the New York Stock Exchange. The stocks of Ford Motor Co. and General Motors Corp., which also expect to report strong profits later this month, also moved up. Ford gained $1.125 to $29.375, and GM leaped $1.625 to $47.125. The earnings report came on a day Clinton visited the Detroit area to campaign for Rep. Bob Carr (D-Mich.), who is in a tight Senate race with Republican Spencer Abraham.

In a speech to several thousand auto workers at Ford's Mustang assembly plant in Dearborn, the President said his policies had revived an economy "stuck in reverse." He later met with Big Three executives and UAW members, praising both for the industry's turnaround.

Auto sales have been one of the brightest spots of the economy. For the first nine months of the year, car and truck sales are up 9% over last year, and most analysts predict the boom will continue through 1995.

In the third quarter, Chrysler's sales increased 15% from a year ago. Demand was particularly strong for its minivans, Jeep Grand Cherokee, Dodge Ram pickup and Neon subcompact.

The brisk sales allowed the company to improve its profit margins by dropping consumer incentives. The average discount given buyers was $520 in the quarter, down from $775 a year ago.

"Strong retail demand . . . allowed us to reduce incentives despite increased competition," Chrysler Chairman Robert Eaton said.

The company's production is expected to increase substantially in the fourth quarter. And analysts expect its sales to continue to increase.

"They should do even better next year," said David Cole, director of the Office for the Study of Automotive Transportation at the University of Michigan.

Chrysler, which was in deep financial trouble just five years ago, is using the soaring profits to improve its balance sheet.

The company contributed $600 million in the quarter to its unfunded pension liability, bringing to $1.8 billion the amount it has set aside this year. Company officials said the unfunded liability--which stood at $2.2 billion at the end of last year--should be eliminated by Dec. 30.

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