Rebates, Retooling Take Share Of Chrysler Earnings

Chrysler Corp.’s fourth-quarter profits were hurt by a near doubling of rebates and other incentives used to lure buyers as well as the costs of retooling factories for a new model lineup.

A 6 percent increase in Chrysler’s net income was chiefly the result of one-time gains in the quarter and a big charge a year earlier. Without the special items, Chrysler would have reported a 27 percent profit drop.

The No. 3 domestic automaker spent $1,185 per vehicle in incentives, compared to $660 per vehicle in the fourth quarter of 1996.

“It was pretty much expected it would be a sloppy quarter and a poor quarter, and it was,” said Michael P. Ward, an analyst with PaineWebber Inc. in New York.

Chrysler’s stock fell 69 cents per share Friday on the New York Stock Exchange to $33.50.

Automakers were forced to use incentives heavily late last year to ensure that industrywide sales would match those of 1996.

But by the end of the quarter, Chrysler had been able to cut its average incentive back a bit to $1,145, said chairman Robert J. Eaton. He said he expects Chrysler’s incentive spending to level off because the automaker has more new models that should sell more easily.

Gary C. Valade, the chief financial officer, said Chrysler’s worldwide profit per vehicle was down about 35 percent in the quarter in part because of the incentives spending and plants being retooled for new vehicle launches.

The third biggest U.S. automaker earned $852 million, or $1.28 a share on a fully diluted basis, for the October-December period. That was up from $807 million, or $1.12 a share, a year earlier. Without special gains and charges, the company’s profit would have been $792 million, down from $1.09 billion.

Chrysler’s full-year profit of $2.8 billion was down 20 percent from 1996, but analysts said the results were solid given a 29-day strike and new model introductions that shut down factories.

“They had a lot adversity,” said Gary Lapidus of Sanford C. Bernstein in New York. “They did pretty well considering.”

But he added, “Chrysler had a huge transition in 1997, and they still managed to earn some pretty good money on the bottom line.”

Eaton said the company should increase worldwide sales by 200,000 this year and boost its U.S. market share 1 percent to 16 percent, where it was at the end of 1996.

“We’re starting to get some advantage out of the products we introduced in the third, fourth quarters,” Eaton said.

Some of the stocks that are moving substantially or trading heavily today on the New York Stock Exchange, Nasdaq Stock Market, and American Stock Exchange.

NYSE

Gateway 2000, up 3-1/4 at 37-1/4

The North Sioux City, S.D.-based mail-order computer seller late Thursday reported fourth-quarter earnings that topped Wall Street estimates.

Nu Skin Asia Pacific, up 4-3/8 at 20-5/8

The Provo, Utah-based direct seller of health and beauty products agreed to acquire the core assets of its privately held affiliate, Nu Skin International Inc., for $250 million in stock and assumed debt.

NASDAQ

Digital Lightwave, down 6-3/16 at 4-15/16

The company, which makes computer systems for testing lightwave telecom networks, said it expected to report a fourth-quarter loss, and that it would be restating its results for the second and third quarters.

Access Health, up 4-9/16 at 30-9/16

The Broomfield, Colo.-based provider of clinically-based care management services reported first-quarter earnings that topped Wall Street estimates.