Chrysler Corp. Chairman Lee A. Iacocca said yesterday his embattled auto company made a $12 million profit in the April-to-June period this year, its first quarter profit since the final quater of 1978.
Iacocca said the company, like the rest of the industry, would face serious financial problems if auto sales don't recover sharply by the fourth quarter. Even with the second-quarter profit, Chrysler is still $286 million in the red because of its first-quarter losses.
But Iacocca told a National Press Club audience that sales are up 25 percent so far this year, compared with a year ago, thanks to the continued strength of its K-car line, and that the company's financial position has been "significantly strengthened."
Chrysler's pretax profit was $21 million in the second quarter, compared with a loss of $536 million in the second quarter a year ago.
The recovery, in the face of a continuing depression in car sales, is a "little miracle," Iacocca said. In no mood to see that achievement minimized, he challenged critics who say Chrysler stepped up second-quarter production unrealistically to guarantee a profit, leaving its dealers with a large backlog of unsold cars.
"We've been accused of adjusting the books just a little. Let me say this is a genuine profit," he said. Chrysler, along with the other auto companies, did build many more cars than it could sell in the second quarter because it didn't anticipate the sharp sales slump in May and June, the worst for those months in 28 years, Iacocca said. But Chrysler's backlog is no worse than its competors' he said, "so don't let anybody tell you our second quarter was a fluke. It was real."
Iacocca said Chrysler's cash resources are approximately $350 million -- working capital of $150 million and a "cushion" of $200 million that it will need. "July and August are going to be long months."
He maintained that Chrysler will do well in the balance of the year provided that interest rates decline siginficantly. If the prime rate remains near 20 percent, however, there is "disaster" ahead for the entire industry, he said.
The No. 3 auto company reported sales of $3.1 billion in the second quarter, compared with $2.1 billion in the same period last year. The concessions Chrysler received from employes, suppliers and creditors have reduced its annual expenses by $2 billion a year and cut its break-even point almost in half.
To conserve cash over the next six months, it is asking the government's Chrysler Loan Guarantee Board for permission to stretch out a $260 million pension fund payment due Sept. 15. The United Auto Workers union had said it would approve a delay, provided the payments are made in full by the end of March.
The second-quarter profit is a response, Iacocca said, to the "intellectual carpetbaggers" who insisted 18 months ago that Chrysler should simply "die with dignity" and not seek federal aid.
"You tell me whether or not this nation has been better served" by the loan guarantee, Iacocca said.