Iacocca Plans to Try Balancing Act for Chrysler : Seeks Higher Profits Without Losing Sales

NEW YORK — Chrysler is looking for ways to improve profits on its auto business without sacrificing the market share it gained by holding down prices and offering aggressive buyer incentives, Chairman Lee A. Iacocca told shareholders Thursday.

“We are in a real dogfight in this market,” Iacocca said. “We intend to price as aggressively as we have to. Our goal is market share. . . . We want all the ground we can take.”

Chrysler increased its share of the U.S. vehicle market to 14.5% at the end of April from 13.3% a year ago while industry leader General Motors continued to lose market share.

The No. 3 U.S. auto maker pushed up its share by keeping its prices the lowest among the Big Three auto companies and offering “the biggest rebates and incentives the world has ever known,” Iacocca said.

The pricing strategies and continuing expenses from Chrysler’s August acquisition of American Motors have pushed down profits. A United Auto Workers contract ratified last week will put further pressure on earnings.

In addition, Chrysler has increased spending on new product research and development by 25%, or $150 million, in 1988--a necessary expense for updating its cars and trucks with new engines and transmissions in the 1990s.

Expects Higher Earnings

Chrysler’s immediate capital spending on new products and facilities will be about $2.8 billion in 1988, nearly even with $3 billion in 1987, Iacocca said.

Iacocca predicted that Chrysler would earn more in the second quarter than the $183.7 million it earned in the first quarter, but would not do as well as analysts are projecting because of costs including continuing incentives.

“I can’t tell you how long it will be before we can do something to improve our profit margins--that is, without giving up any of the market share we’ve taken,” he said.

Bennett Bidwell, president of product and marketing for Chrysler Motors Corp., Chrysler’s core auto making business, said Thursday that Chrysler is looking at increasing prices in 1989 to improve profits.

“At some point in time you reach a point of diminishing returns” selling cars and trucks by offering rebates on top of low prices, Bidwell said.

For example, the Dodge Aries and Plymouth Reliant are Chrysler’s best-selling cars. But Chrysler is selling them as part of its America series with a $6,995 base price and more standard equipment than in previous years and including the cars in its rebate campaign.

“That doesn’t leave much on the table,” Bidwell said. Chrysler will replace the K-car after 1989 with the Dodge Spirit and Plymouth Acclaim, a bigger, more modern version of the same car that goes on sale in January.

Despite intense conflict between Chrysler and its 66,000 UAW workers in the months before and during negotiations on the new two-year contract, only a handful of UAW representatives other than President Owen Bieber--a member of Chrysler’s board--attended the meeting.