Iacocca Wants Another $500 Million Out of Costs; Target Now $3 Billion
DETROIT (AP) _ A cost-cutting program that Chrysler Corp. Chairman Lee Iacocca announced 18 months ago has tripled in size to $3 billion as the automaker struggles to keep from slipping deep into the red.
Iacocca told auto analysts last week that the company’s $2.5 billion cost- cutting target had been raised to $3 billion, analyst John Kirnan of Kidder, Peabody & Co. of New York said Monday.
Iacocca felt the company already had identified $2.5 billion in excess costs and another $500 million could be trimmed, Kirnan said.
The company has annual expenses of about $26 billion.
But Kirnan said Chrysler’s budget carving is getting dangerously deep.
″When you look at the cost cutting that’s done to date, you are really running the risk of cutting the meat and bones of the corporation,″ he said.
Chrysler spokesman Steve Harris said the cost-cutting target was never designed to be fixed.
″We’ve said all along we would cut where we could as long as it didn’t affect product programs or customer satisfaction,″ Harris said.
Chrysler, like General Motors Corp. and Ford Motor Co., is expected to report a significant loss for the fourth quarter when financial reports are issued next month.
Analysts have speculated that the Big Three will lose a total of about $1.7 billion during the fina three-month period of last year. That would be the largest quarterly loss in automotive history.
Chrysler’s original cost-cutting program was announced in mid-1989 with a $1 billion target. Since then, the target has been increased, more than 2,000 white-collar employees have taken early retirement and the company has shut down assembly plants.
At the analysts’ meeting, Kirnan said, Chrysler officials also displayed some of the company’s new products for the early- and mid-1990s. Among the vehicles analysts saw was Chrysler’s much-needed new mid-size car, code-named the LH. Production of the vehicle is to begin in late 1992 for the 1993 model year.
Kirnan liked what he saw.
″I think their future product programs are really, really terrific,″ he said. ″I think what they are really trying to do is to cut as much costs as they can to guarantee they get those new products out on time.″