Chrysler Corp. Chairman Lee A. Iacocca said today his company is abandoning plans for hundreds of millions of dollars in domestic expansion in favor of foreign purchases, largely because of the Reagan administration's decision not to request a fifth year of quotas on Japanese auto exports to this country.
In all, Iacocca said Chrysler was cutting $2 billion from plans to invest $12.5 billion in new plants and products in North America over the next five years. Analysts estimated the change would cost the nation up to 20,000 new jobs.
"Our job now is to see that we keep the production capacity and the jobs that we already have here . . . to keep Chrysler strong and profitable. We can't be thinking about expansion now," Iacocca said.
Iacocca made the announcement following a meeting of the Chrysler board, which approved the measures, including establishment of a new corporate division, International Business Development, to increase the company's overseas purchases of low-cost auto components and to look for joint-venture opportunities with foreign companies. Chrysler now obtains 93 percent of its components from domestic sources.
Iacocca named Chrysler Executive Vice President Stephan Sharf to head the new unit, which will be capitalized with an initial $50 million.
Under Iacocca's direction, Chrysler has built a reputation for providing relatively low-cost economy cars, such as the Omni and Horizon. But he indicated today that approach may be too costly in a U.S. market that is preparing to receive low-cost imports from Yugoslavia, Korea, and perhaps Taiwan, in addition to Japan.
That means that Chrysler will rely on the Japanese and other sources for inexpensive small cars, and will shift its domestic capacity more toward the production of luxury models.
"We're going upscale. We're going where the money is," Iacocca said.
United Auto Workers union President Owen Bieber, the lone labor official on the 20-member Chrysler board, joined in the unanimous vote approving the change in direction. Other elements of Chrysler's post-quotas strategy approved today include:
* A previously announced plan to increase by 200,000 units a year the number of cars Chrysler imports from its Japanese partner, Mitsubishi Motors. Chrysler says it imported 87,500 cars from Mitsubishi last year, although U.S. government figures put that number closer to 92,000.
The additional 200,000 soaks up nearly all of the new capacity that Chrysler said it would have built in the United States if quotas were kept in effect.
* A decision not to build the new "P" car at Chrysler's plant in Belvidere, Ill., where the company has been rolling out its front-wheel-drive, subcompact Omni-Horizon cars since 1977.
Chrysler is scaling down planned P car production from 300,000 units annually to 150,000 cars a year, largely because the company will introduce the P model as a higher-profit, small luxury car, instead of as a replacement for the economical Omni-Horizon models.
* A plan to continue Omni-Horizon production for at least two more model years, closing off the line in the spring of 1987. The fate of the Belvidere plant is uncertain at that point, even though Iacocca said today that he would "move heaven and earth" to try to keep it open.
The Chrysler board's action primarily affects Indiana and Illinois, two states in the running for what was supposed to be a new Chrysler plant capable of turning out 250,000 small cars a year. Plants with that kind of capacity currently require a production work force of about 4,000 people and a pool of suppliers with about three times that many workers.
"In effect, Indianapolis and Peoria lost out to Japan," said one Chrysler official, referring to the two Midwest cities where Chrysler had options to open its new plant. "We don't like it to come out that way, but that's the way it is."
Iacocca attributed the changes in the company's plans to "a couple of other factors" as well as the prospect that the Japanese will discontinue auto quotas March 31. He mentioned the high value of the dollar and what he called a U.S. government energy policy that "gives this country the cheapest gasoline in the world."
Chrysler initially planned to spend $9.5 billion in 1984-89, but that was raised to $12.5 billion on a tentative basis and was knocked back to $10.5 billion following the decision on Japanese quotas.
Japanese auto quotas have been in effect since April 1, 1981. They now officially limit Japanese auto exports to this country to 1.85 million units annually, even though the Japanese have shipped about 100,000 units more than that through third-party territories.
Iacocca said that he was proud of Chrysler's fight to extend the quotas. "But we lost. And that's that, and it's over. Now, it's a new world, and we've got to adapt. And we're prepared to adapt."