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SHARE PRICES BELIE AUTOMAKERS' GAINS Industry called better off than stocks indicate


Kirk Kerkorian's frustration with Chrysler Corp.'s lukewarm performance in the stock market this year must seem awfully familiar to the millions of other Americans who own pieces of the Big Three.

Despite coming off a year full of record earnings, impressive sales gains and triumphant chest-thumping in Detroit, U.S. automakers' stocks have been in the doldrums this year.

There seems to be little the Big Three can do to impress Wall Street. In January, for example, on the day Chrysler reported the biggest profit in its 69-year history, the company's stock responded by falling $1.25, to $51.625, a share. A buying opportunity? Nope. The automaker's shares fell another $1.50 the next day and ended the week down $5.75.

The slide continued, and Chrysler's stock was selling for $39.25 Tuesday, a day before the multibillionaire Mr. Kerkorian and former Chrysler Chairman Lee Iacocca made their $55-per-share bid for the company.

Chrysler is not the only undervalued member of the Big Three, some analysts and industry experts say. Indeed, the domestic industry as a whole is in much better shape than the market would indicate, said Edward Lapham, executive editor of Automotive News, the industry trade paper. "Chrysler is undervalued. Ford is undervalued, and even General Motors is undervalued a little bit."

"Auto sales are a little soft right now," Mr. Lapham said, "but by most reputable accounts they are on a plateau where they are not going to decline sharply for the next couple of years."

Dealers sold 5.2 percent fewer cars and light trucks last month than in March of 1994, but last month was still the second-best March since 1988.

Lackluster sales prompted Chrysler and Ford earlier this week to revise their 1995 sales forecasts. Chrysler, which had been predicting industry sales of 15.8 million cars and light trucks, revised its estimate to 15.5 million.

Ford is now predicting sales of 15.5 million vehicles, down from an earlier estimate of 15.9 million.

During 1994, the industry sold 15.4 million vehicles.

There are other signs that the U.S. industry's vaunted comeback may have peaked last year -- the Big Three have dangled generous incentives and rebates before buyers in the first three months of the year, even on traditionally high-profit vehicles like minivans. Such incentives are expected to eat into automakers' profits this year.

But even if sales and profits, as expected, come in lower this year, some believe auto stocks are still a bargain. David E. Cole, director of the University of Michigan's Office for the Study of Automotive Transportation, is one of the bulls.

Noting that Chrysler's price-to-earnings ratio was 4-to-1 before yesterday's development, Mr. Cole said "Wall Street has either not been looking at the industry or it has been contemplating a downturn and discounting the values of automakers' stock substantially.

"The industry is becoming more and more healthy," Mr. Cole said. He cites two factors:

* Internal improvements have significantly reduced the cost of building cars in the United States, while boosting profits. "The domestics have made a lot of gains in recent years that have really revitalized their operations," he said.

Mr. Cole pointed out that U.S. car companies have reduced the man-hours needed to build a car in recent years "from the 30 something to 20 or the high teens."

* Japanese automakers' difficulties. In the 1980s, Mr. Cole said, "the popular view was that the Japanese were going to conquer the world. That does not look like it is going to be the case now."

He said the strong yen, an aging Japanese work force and excess capacity "have the Japanese manufacturers in a new game that certainly plays in favor of the domestic manufacturers."

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