Chrysler Corp. Chairman Lee A. Iacocca, ecstatic that his company received a $500 million cash injection from federally backed notes sold to the public Tuesday, said today the ailing automaker will be "back in the black" by the fourth quarter of this year.
Iacocca told reporters the company expects to draw at least another $250 million of the $1.5 billion in loan guarantees, authorized by the government Tuesday morning.
He said Chrysler will need the additional funds as it launches its new line of small, fuel-efficient front-wheel-drive cars in September.
The new cars -- called the K car among Chrysler's planners -- are the hope of the financially troubled corporation, the third-largest automaker in the nation behind General Motors Corp. and Ford Motor Co.
He said that companies that purchase big fleets of cars for their own use already have ordered more than 46,000 of the new cars and that Chrysler had to limit the number of K cars it would sell to fleet owners so it would have enough of the small automobiles for its dealers.
"We've got a winner," he said. Chrysler plans to produce 600,000 of the small cars during the 1981 model year. "The quality looks so good," the Chrysler chairman said, the company has moved up the production schedule by two weeks. Chrysler will produce 180,000 of the K cars before Christmas. Earlier the company thought it would be able to make 150,000 K cars by the holidays.
Despite Iacocca's ebullience, many industry observers think Chrysler will have troubles struggling back into the black by the fourth quarter and may never make it.
Iacocca himself conceded that the severe slump in the automobile industry could put a kink in not only Chrysler's plans but those of Ford and GM as well.
Domestic auto producers are selling cars at an annual rate of about 5.3 million units in recent months, half the pace of 1978 and early 1979 -- before the Iranian oil shortage created a new spate of gasoline lines across the country and sent U.S. auto buyers on a small-car buying jag they have not gotten off.
Foreign car sales here, usually about 18 percent of the market, have climbed close to 30 percent because domestic producers do not have the capacity to make as many small, fuel-efficient cars as consumers are demanding.
Chrysler, for example, saw its big-car and truck sales slump mightily in the last 18 months but was selling its small, front-wheel-drive Omni and Horizon subcompacts as fast as they could be built. But Chrysler lacked the ability to make or buy more than 300,000 engines to fit the subcompacts. As a result, Chrysler lost sales to foreign automakers, mainly Japanese, who produced small cars in quantity. Iacocca said the new K cars, which are supposed to get close to 30 miles per gallon, fill a niche in the U.S. marketplace. He said the quality problems that have plagued Chrysler in recent years have been eliminated in current products and stressed that a reputation for quality will be what sustains the new K cars in the years to come.
He said dealers are ordering as many K cars as they can and that the company is allocating vehicles to its dealers. When General Motors introduced its fuel-efficient X cars 15 months ago, buyers also flocked to those products. For some of the GM cars, the waiting list was backed up for months.
"The key question is the staying power of the K car," Iacocca said. "You never worry about the first year."
He said that by 1983 the company will have changed completely its ability to produce small cars and by then will have phased out nearly all of its big autos, called gas guzzlers by industry critics.
Iacocca said that the company immediately will begin to pay off suppliers, who have foregone payments for products shipped to the automaker during its period of crisis. He said the company will use between $130 million and $200 million of the funds it just raised to pay off suppliers.