Chrysler Corp. has an estimated $900 million in cash and marketable securities. An incorrect figure was published yesterday.
Chrysler Corp., which spent the last three years cutting costs in a successful attempt to avoid bankruptcy, yesterday said it will buy an idle Volkswagen of America Inc. assembly plant near Detroit.
The unused VWOA factory, with 2.7-million square feet of space, is needed to help Chrysler meet growing demand for its passenger cars, Chrysler officials said.
Neither Chrysler nor VWOA officials would reveal the price of the sale, which is conditioned on final approval by the boards of directors of the two companies.
Approval must also come from the Chrysler Loan Guarantee Board in Washington, which was given veto power over Chrysler's financial planning after Congress authorized $1.2 billion in federal loan guarantees in 1979 to prevent Chrysler from going bankrupt.
Chrysler said it would invest at least $160 million in equipment and modifications needed to produce a new front-wheel-drive model, currently identified as the H-car.
The plant, also scheduled to roll out the Chrysler's front-wheel-drive New Yorker passenger cars, could have 1,600 employes, company officials said. The company plans to begin production of its 1985-model cars at Sterling Heights in July 1984.
The purchase announcement came one week after Chrysler's successful sale of 26 million shares of common stock, at $16.625 per share. The offering, part of a major recapitalization plan to help Chrysler pay debts, raised $432.3 million.
That Wall Street performance, coupled with Chrysler's latest record in shedding operating costs and increasing sales, serves as tangible evidence that Chrysler has turned around and is on the road to a comeback, auto industry analysts said.
Chrysler's plans to stay on that road include a $6.6 billion program to come out with new products, now through the 1986-model year. Of that amount, approximately $3.8 billion is for capital expenditures, such as the purchase of the VWOA plant.
"Chrysler's longterm viability is predicated upon its ability to achieve sustained levels of significant operating profits, which in turn requires that Chrysler succeed in marketing new products," the company said in a prospectus describing its recent stock offering.
Chrysler made a $170 million profit last year--the company's first since 1979--largely because of the sale of its defense subsidiary.
The $1.2 billion in federally backed loans is due in 1990. But Chrysler officials say their present recapitalization plans include early repayment, by 1985. The company, which has about $900 billion in cash and marketable securities, also is required to pay deferred pension obligations totalling $228 million by 1984.
VWOA is selling its Sterling Heights plant because of its lack of success recently in selling cars in the United States. VWOA renovated the plant, a former U.S. Army missile factory, in 1981. But VWOA's sales fell 43.9 percent last year from 1981, and are down 21.7 percent this year from 1982 levels.
A VWOA spokesman said in Detroit yesterday that the sale will help his company "redirect our resources."