European Stars and Stripes (Newspaper) - September 08, 1985, Darmstadt, Hesse                                Of to avoid bankruptcy and finance the a car the government helped out with $1.5 billion in loan guarantees. This time the company does not have that option and Chrysler executives say it is not needed. They say the Cash will come from profits and depreciation in addition to the $3.8 billion in Cash that is available to the company now. But should a Sharp reverse an expensive labor contract a drop in sales or even a general economic downturn reduce Chrysler s sales or per car profits the investment program could fall apart. It will take several years of Back to Back after tax earnings of $2 billion or year to finance Chrysler s minimum level program said Malcolm Sailer a professor at the Harvard business school who is preparing a Book on the american Auto Industry. If the Union demands parity in the current negotiations and if they Don t develop Doser ties to overseas partners they wih wind up As a designer and assembler of cars manufactured  Stilt the Chrysler boosters seem to outnumber the naysayers. Chrysler is the Only company with record earnings adjusted for inflation in this period said Martin i l Anderson a consultant with sector research in Boston. I m More optimistic about its prospects than i was a year  s Chrysler has a lot going for it. It has had spectacular gains in productivity under Iacocca s Cost cutting Tutelage. In the second Quarter Chrysler sold 618,463 care and trucks Tor a pretax profit of $ 1,378 a unit. Pm f in the same period sold 2,443,000 units Lor an average profit of $767 a vehicle. Comparisons Are distorted i somewhat by pm s heavy spending on new programs and its overseas operations but analysts say the Basic. Point is valid Chrysler makes More on its cars than pm. V productivity comparisons with Ford Are difficult since a about halt of Ford s operations Are overseas -1 i addition Chrysler is taking Small bites out of pm s Mies. The Chrysler share of the Market Tor cars made in i the United states was 14 percent in the first seven it months of this year compared with 11.8 percent in. F 1881. Industry analysts say the growth came almost i entirely at pm s expense. What is More As of now f Chrysler is the Only one of the big three Auto makers i whose line of cars meets federally mandated mlle per gallon standards. If the department of transportation does not Grant the other companies More time to meet those standards they May have to temporarily Stop telling some of their popular but fuel hungry bigger cars that could in the Short term Widen the Market for Small cars Chrysler s big  executives claim they can develop new products at less Cost than competitors. Unlike pm and Ford Chrysler gladly discloses its breakeven Point the number of cars it must sell to  its Cost of operations. The breakeven it says has been slashed from More than 2 million units a year in the 1970s to i i. Of Felon today. We had to get efficient in 1980 or die 8,1985 Chr Yilth it at a Cro Roadt and Iacocca t reputation it again on the lint. Said Robert s. Miller Chrysler s chief financial officer. And we be stayed  staying lean has always been a key Point in Lac Mica s strategy for Chrysler. For example he Cut Chrysler White Collar work Force to 21,000 from 41,000 during the crisis period of 1979 to 1982. Although about 35.000 Blue Collar workers have been called Back to work in the last Lew years Only about 1,000 office workers have been rehired. The other automakers Are still proceeding cautiously with plans to trim their office staffs with Ford disclosing a plan to trim its White Collar ranks by about 20 percent 10.000 people Over the next five years. Iacocca has been As stringent about capital expenditures As he has about labor costs. His theory is that it is better to miss a Small increment of sales in a Boom year than to be crushed by expensive unused facilities during a downturn. He walked at adding a second Plant for minivans and Only recently decided to convert a facility in St. Louis to double its capacity for the popular vehicles. We probably could have a swing Assembly Plant and be making a lot More Money right now Iacocca said but when the downturn comes you be got a $600 million Plant sitting dead empty. You just Don t want to do that when you re trying to husband your investment  analysts concur. This is a very profitable 1.5 million unit company but it could have real troubles if it tries to obtain the capacity for 2.5 million said Anderson the consultant. They will do All right if they pick their targets and Don t get  keeping costs in line will not by itself ensure Chrysler s future. They have been very smart said Holnbach the Merrill Lynch analyst. They have expanded their Market share without spending a whole lot of  but while pm has cars of All sizes styles and horsepower something Lor everybody As Holnbach put it Chrysler s product lineup remains tied very much to the essential elements of the a car line. Iacocca too recognizes that More than Cost cutting is needed his strategy includes broadening the product line. In the Middle of the 1987 Model year Chrysler will begin introducing larger front wheel drive cars including a top of the line Imperial to compete with Cadillac Lincoln and High priced european imports such As Mercedes Benz. Iacocca says the cars will be an entirely new platform from which additional models can be derived. The company will also introduce a new line of sporty cars which will be led by a $25,000 sports car Chrysler is developing with Maserati. Chrysler expects to sell Only about 5,000 a year but Hopes the Halo effect of the italian exotic will stimulate sales of other sporty models much As pm s sporty Pontiac to of a few years Back boosted the entire Pontiac line. Improving buyer demographics. Chrysler was known in the past As Misar motors primarily a maker of lower priced cars for older Blue Collar buyers in the Northeast and Middle West. To a Large extent that is still the group to which its Basic two and four door sedans Appeal Iacocca says that buyers of those cars average 53 years of age. But the average buyer of the Chrysler Lebaron its and Dodge Lancer both Small sporty coupes is 34 years old. And buyers of the Plymouth voyager and Dodge caravan minivans average 38 years old this Iacocca Hopes will give Chrysler a Pool of younger owners to be enticed with future products including the new line of sports cars being developed with Maserati. The minivans Are hugely profitable. They Are base priced at $9,800, but have been going out the door with stickers averaging Over $13,000 As customers Load them with options. Getting economies of scale Iacocca remains a swayed by critics who complain that too Many Chrysler cars use components and engines from the k car line and thus Are not different enough to account or shifts in Market tastes. He says it is just Good economics in that it provides flexibility and lower costs in both purchasing and manufacturing. After All. What was the Mustang but a Falcon in a new dress he paid referring to his greatest Success in his former career at Ford. If All the door handles and switches and components like that Are common you get the complexity out the Quality up and the Public does t  applying advanced technology in some ways Chrysler has benefited from japanese efficiency. It owns 15 percent of the Mitsubishi motor co., and already gets Many of its Small cars trucks and optional engines from that corporation. Now Chrysler is increasing its holdings in Mitsubishi motor to 24 percent and has agreed to a joint venture to build and operate an Auto Assembly Plant in the United states. Analysts have estimated that Mitsubishi and the joint venture will be supplying Chrysler with 20 percent of its cars by 1989. Still Iacocca has put a High priority on advancing in House production techniques. Richard e. Dauch Chrysler s executive vice president for manufacturing says the company is working on such techniques As modular Assembly and just in time production and expects to be applying them As Well As or better than the japanese by the end of the decade. We know How to do 50 to 60 percent of it today although it will take time to execute it said Dauch. The other 40 percent we have ideas about at a higher degree of  cultivating outside suppliers. Chrysler adds Only about 30 percent of the value of the vehicles it Sells compared with 70 percent for pm. At one time this was thought to be a disadvantage since Chrysler had to pay suppliers a profit on purchased components. But the emergence of Low Cost suppliers in third world countries has made such outsourcing an attractive proposition. Pm is trying to get Down to our level of disintegration says Iacocca. These last two facets of Iacocca s strategy technology and outsourcing Are for now the ones most vulnerable to external variables. The Liberty project will depend a great Deal on whether Chrysler can in fact generate the $11.5 billion Iacocca is counting on. And the Law has said that a key goal in the negotiations is to limit Chrysler s Freedom to shift work outside. Thom Union negotiations Are perhaps the most immediate danger the company must face. The typical Chrysler worker now earns $12.79 an hour while his counterpart at pm and Ford earns $13.18. The Union has made Clear it wants parity. Moreover Chrysler has Many living retirees and any increase in health benefits or other fringes that go to retired people could push costs up far higher than the numbers on the current payroll would indicate. Still in interviews Iacocca comes across As not frenetic about any problems. He accepted an offer from the Board in december 1983 that will give him 150,000 shares of Chrysler Stock and an option to buy 300,000 More at $28 a share if he stays until the end of 1986. Ill stay for that he said. It s not that i need the Money that bad but i Don t want to leave it lying on the  Iacocca probably will leave at the end of 1966, when he will be 65. He has Little patience for outsiders who suggest that Chrysler will suffer when he leaves. The people behind me Are As Good As i am maybe better he said. Adversity is Good experience. Three tour years in the trenches have folded a Good team. Well see in the next  the stars and stripes Page 15