Chrysler Corp. will come close to making a profit during the second quarter, a milestone the company has not been near since 1978, Chrysler Chairman Lee A. Iacocca said yesterday.
Iacocca said he had hoped that by now, a second-quarter profit would have been assured. But the largest increase in interest rates has abruptly jeopardized Chrysler's sales and undercut the quarterly financial results, he told editors and reporters at The Washington Post.
"I can sell cars at a 10 percent [prime interest] rate. I can sell cars at 15 percent -- you get used to it. But as soon as it hits 20, it's a psychological barrier, really, a sonic barrier," Iacocca said, beginning a lengthy, pungent critique of the administration's economic policies and the Federal Reserve Board's attempts to regulate the growth of the money supply.
"They don't stand a chance of their economic program working unless they get a rate we can live with," he said.
When the prime interest rate reached 20 percent last week, Chrysler's dealers stopped in their tracks, recalling what high interest rates had done to sales twice before, he said.
"Our dealers -- at the worst time in our lives -- just cut all of their orders in half. So I have 100,000 cars, and they only ordered 50,000 and they say, "We got burned twice. Take it at 50 and get lost.'"
Nevertheless, Chrysler's success in April and May should provide enough momentum to put the second quarter in the black, or close to it, Iacocca said. The financial operating plan approved by the government's Chrysler Loan Board estimates a $34 million second-quarter loss.
"We'll do better than that. For us it's a big turning point," said Iacocca.
Commerce Secretary Malcolm Baldrige, one of the administration officials with whom Iaccoca met this week, said he had changed his mind about Chrysler's prospects. "A year ago, I would have said they couldn't do it. Now, I would say they have a reasonable good chance," Baldrige said.
Chrysler lost $205 million in 1978, $1.1 billion in 1979, $.7 billion last year and $298 million in January-March quarter of this year, for an unprecedented total loss of nearly $3.4 billion. The company would have collapsed but for $1.2 billion in federally guaranteed loans and concessions by employes, suppliers and creditors.
Even with a good second quarter, Chrysler has not escaped the financial pressures that have squeezed it so hard for nearly three years.
The third quarter will confront Chrysler with a new financial drain as it equips its plants for the 1982 model-year production, but Iacocca said the company has been able to improve its cash reserves in preparation for the new model year.
Iacocca said Chrysler is "saving" $1 billion a year through its recent agreement with the Japanese automaker Mitsubishi, which will produce 250,000 to 300,000 small cars and trucks for sale by Chrysler in this country. 2