The Big Three automakers are heading into a downturn that will depress stock prices and make Chrysler Corp. particularly vulnerable to corporate raiders by 1991, a leading industry analyst believes.
"The auto industry has been quite strong and auto stocks have had quite successful runs during this economic expansion starting in 1982," said Paul Kleinaitis. "But are they still on track? Our opinion is that they are about to derail."Kleinaitis, assistant vice president and auto industry analyst for the credit-rating and investment research firm Duff & Phelps, outlined his assessment of the industry's future at a D&P investment conference.
"In the near term, we see a negative sales growth outlook," he said.
"Secondly, in the long term, autos are a slowing-growth industry . . . so if we have a near-term downturn, there's no anticipation of a longer-term kick due to demand," he said.
"Third, and probably worst of all, is a looming overcapacity situation - not only in the United States but worldwide," Kleinaitis said.
Chrysler, he said, is particularly vulnerable because, unlike Ford and General Motors, it has no overseas operations to offset the impact of domestic sales declines and because it is basically a "two-product company" - Jeeps and minivans, Kleinai-tis said.
Jeep, because of its unique brand recognition, has a relatively stable market, but Chrysler minivans face increasing competition with Ford, GM, Nissan and Mazda increasing their activity in the field.
"Half of Chrysler's bread and butter is vulnerable in the near future," Kleinaitis said, predicting the No. 3 automaker's stock could fall to 50 percent of book value in the next recession.
And that provides an upside for Chrysler stock; it could be a target of corporate raiders.
"Chrysler has significant assets on its balance sheet that do not even touch the `motors' part of the business," Kleinaitis said.
He estimated the value of Chrysler's 20 percent stake in Mitsubishi Motors at $7 a share of Chrysler stock and said Gulfstream Aerospace adds another $4 to $5 a share.
"Chrysler financial group, which can be viewed as a stand-alone organization, is worth about $8 a share.
"Chrysler's selling now for around $24 a share. Its restructured value is at least $20 without even touching the motors business, so I think there is an opportunity for a raider to come in and realize these values."
But he said that is improbable until 1991, when Lee Iacocca is likely to retire.
"He (Iacocca) no doubt could fight a very strong battle to keep his company, but after he retires I think some of the people beneath him are less strong," Kleinaitis said.
He said GM stock probably is in the best position to survive a downturn. The stock is undervalued, and soon-to-be introduced new vehicles - including a mini-van - will help GM regain market share lost earlier in the decade, Kleinaitis said.
He said while Ford is his favorite company in terms of operation and balance sheet, it is his least favorite in terms of stock.