Chrysler Reports Record $3.7 Billion 1994 Profit, Workers to Share Wealth
DETROIT (AP) _ Strong sales of cars and trucks and sharply reduced spending on marketing helped make 1994 the most profitable year in Chrysler Corp.’s history, the automaker said Tuesday.
The No. 3 U.S. automaker’s $3.7 billion earnings will translate to fat profit-sharing checks or bonuses for its employees, and position the company for growth until at least 1997, Chairman Robert J. Eaton said.
He and Chrysler economists disagree with analysts who believe Federal Reserve action to boost interest rates will put a damper on sales and cause the business cycle to peak.
``We have agreed with every single raise the Fed has made,″ Eaton said after the earnings report. ``(It) has had and will have the effect of smoothing out the cycle and extending the positive portion.″
Chrysler earned $1.2 billion in profits in the fourth quarter, compared with $777 million in the October-December period of 1993. The fourth-quarter earnings reflected a favorable tax adjustment of $132 million.
The previous Chrysler earnings record for a year was $2.4 billion in 1984. In 1993, the company had a net loss of $2.5 billion, as accounting changes that year produced a one-time reduction in earnings of nearly $5 billion.
Chrysler’s stock fell Tuesday despite its record 1994 earnings. The automaker’s shares lost $1.25 to close at $51.62 1/2 on the New York Stock Exchange.
Most Chrysler employees will learn this week about their share of the company’s profit. Eaton said two weeks ago that profit-sharing payments to about 75,000 union-represented employees would average about two months’ gross pay. News reports estimated the payment amount at $7,500 or more.
Some 16,500 nonunion employees will also receive profit-sharing payments, and managers and top executives are eligible for bonuses.
The formula for the company’s success in 1994 included:
_ Sharply reduced spending on rebates and other incentive programs, which averaged $570 per vehicle vs. $870 in 1993.
_ Continuing cost-cutting and waste elimination programs that from 1989 through 1993 saved the company $4 billion. Chrysler chief financial officer Gary Valade said savings in 1994 were between $750 million and $1 billion.
_ A higher profit margin on cars and trucks, due to the cost savings. After taxes, Chrysler’s average profit-per-vehicle rose to $1,230 in 1994 from $820 in 1993.
_ A smaller share of sales to commercial and rental car fleets. Fleets accounted for 16 percent of Chrysler sales in 1994, down from 18 percent the previous year.
_ Increasing sales, both at home and overseas. U.S. sales were up 7.6 percent. Chrysler’s international business grew 20 percent, and Eaton said he expected that growth rate to continue this year.
Eaton said the company met its 1994 goals of fully funding its pension plans and accumulating a $7.5 billion cash cushion designed to let it continue developing new products when the business cycle heads downward.
``We expect to renew the entire product lineup again in this business cycle,″ he said.
That starts with an all-new version of Chrysler’s crown jewel, its minivan. Production starts this spring on the first complete makeovers of the Dodge Caravan, Plymouth Voyager and Chrysler Town & Country.
Eaton described the company’s management plan as schizophrenic: conservative with finances but ``aggressive, bold and daring″ with products.
Chrysler’s earnings-per-share were $3.20 for the fourth quarter and $10.11 for the year, compared with earnings of $2.11 and a loss of $7.62 in the respective 1993 periods. Its 1994 revenues were $52.2 billion, up from $43.6 billion in 1993. Fourth-quarter revenues were $14.3 billion vs. $12 billion a year ago.
General Motors Corp. and Ford Motor Co. are expected to report their 1994 financial results by early February.