DETROIT -- Chrysler Corp., the target of a hostile takeover by billionaire Kirk Kerkorian, put out some bad news about its earnings yesterday -- but it wasn't all bad.
The automaker said that its first-quarter profits plunged 37 percent from a year ago, the first time in two years that its three-month earnings have dropped. The flip side is that the poorer financial performance may help the company resist the unwanted offer.
The reason is that the lower earnings reflect slowing sales that is part of an approaching cyclical downturn in the auto industry, many analysts believe. And that may make it harder for an unwanted acquirer such as Mr. Kerkorian to raise takeover financing.
Chrysler's stock slipped 87.5 cents, to close at $47.875, on the New York Stock Exchange. For the second consecutive day, it was the heaviest traded stock, with more than 12 million shares changing hands.
Analyst said the lackluster stock performance yesterday -- a contrast to the frenzied 25 percent rise the day before -- reflected profit-taking along with skepticism about the deal's prospects.
"Some profit-taking is reasonable after Wednesday's big gain," said Ronald Glantz, an analyst for Dean Witter Reynolds in San Francisco. The stock rose $9.50, to $48.75, Wednesday.
The heavy trading came in the wake of $55-a-share proposal that Kerkorian made Wednesday to acquire the 90 percent of Chrysler stock that he does not already own. If completed, the $22.8 billion deal would be the second-largest takeover in U.S. history.
The proposal teams up two corporate legends: the 77-year-old Mr. Kerkorian, whose Tracinda Corp. owns MGM Grand Hotel and Casino in Las Vegas, and his 70-year-old friend and investment partner, former Chrysler Chairman Lee Iacocca.
Their proposal was rejected late Wednesday by Chrysler's board of directors and Robert Eaton, Chrysler chairman and chief executive, reiterated yesterday that the company was not for sale, though he added its board would evaluate all offers.
"We have never been out shopping this company, and I don't want anyone to believe that there is a for-sale sign out there," Mr. Eaton said at a news conference.
On Wall Street, analysts said there is growing doubt about the Kerkorian proposal as many investors remain skeptical that Mr. Kerkorian's offer would succeed.
Mr. Kerkorian, who already is Chrysler's biggest stockholder, proposed buying the company using $5 billion in investor capital, $5.5 in excess company funds and financing the remaining $12 billion. The investor capital includes $2 billion in stock already owned by Mr. Kerkorian and Mr. Iacocca.
Chrysler reported net earnings of $592 million in the first three months of 1995, compared with a net profit of $938 million in the first quarter of 1994. The earnings slipped even though revenues rose 3 percent.
In addition to slower sales, the company said it was hit by high expenses for the launch of its 1996 minivan, a $115 million charge to replace latches on older minivans, higher materials costs and a sharp drop in Mexican sales.