Chrysler bounds back, but it still has to play catch-up

Is Chrysler ''home free'' now that it has decided to pay off its federal government-guaranteed loans? ''I think Chrysler has proved that it can survive,'' says David Healy, a stock-market analyst with Drexel Burnham Lambert Inc., New York. ''When it can come close to making money in a year such as 1982, I expect it will be around for some time.''

Even so, Chrysler still has a lot of ''catching up'' before it becomes product-ready to take on the world, industry observers assert.

For one thing, Chrysler Corporation no longer is a world-size carmaker. While it has a 15 percent financial stake in Peugeot SA, to which it sold its European Simca operations a few years ago, as well as Mitsubishi in Japan, it is no longer directly involved in Britain, France, and Spain, nor does it have automotive operations in Latin America.

Both General Motors and Ford, by contrast, operate major facilities all over the world.

Many suspect Chrysler will ultimately merge with another company, and talks to that end have already been held with Mitsubishi and Peugeot. Chrysler, of course, sells Mitsubishi-built cars in the United States.

Obviously, no one had shown any interest in the money-losing company a couple of years ago.

Perhaps the biggest ''plus'' for Chrysler right now is the upswing in public demand for new cars. If the overall market continues to grow, it will help overcome some of Chrysler's vulnerability.

Yet it faces several major danger spots that could mar its future, among them:

* The just-launched Ford Tempo and Mercury Topaz, for instance, which are right in the K-car traffic lane.

''The Ford Tempo and Mercury Topaz compete head to head with the heart of the Chrysler product line, the K-cars,'' notes John Schnapp of Temple, Barker & Sloane Inc., a management and economic counseling firm in Lexington, Mass.

''In the past when anyone has come out with a brand-new vehicle in that size and price range, it has generally tended to shift market share very radically and quickly. If that were to occur again, it's very likely that Chrysler would be badly bruised.''

* An abysmally low new-product budget compared with its big domestic competitors.

''Chrysler is operating on a peanut-butter budget for product development,'' Mr. Schnapp declares. Simply, he asks, what happens after the K-car runs its course?

Chrysler Corporation has taken an existing car platform, the K-car, and, by stretching it, tucking it, and hanging new bodies on it, made Chrysler appear to have more different kinds of cars in its product line than it really does under the skin.

The forthcoming sports car, limousine, etc., are all derived from the K-car.

''It seems to me that since the launch of the K-car, Chrysler has been pulling rabbits out of a hat,'' Schnapp says.

* An aggressive United Automobile Workers (UAW), which seeks to recoup some of the benefits it gave up as the corporation tottered on the brink of disaster in 1980 and '81.

Michael Driggs, former head of the Chrysler Loan Guarantee Board, once said the biggest contributing factor in Chrysler's backoff from bankruptcy was concessions by the UAW. If its labor costs rise significantly while its manufacturing plants remain far less efficient than those of General Motors and Ford, then suddenly it is at a big cost disadvantage.

''The kinds of profitability that Chrysler now is enjoying could quickly evaporate,'' Schnapp asserts.

''Chrysler is in labor negotiations already and the UAW has asked that the contract be reopened ahead of its expiration (next January),'' notes Mr. Healy of Drexel Burnham Lambert.

With its decision to pay off the final $800 million of federal government-guaranteed loans more than seven years early (the first $400 was repaid in June), Chrysler not only saves $56 million a year in interest, but also wins its freedom from the Chrysler Loan Guarantee Board, set up by Congress in 1980 to monitor the cash-strapped automaker.

Now, three years later, Chrysler's cash reserves, before repayment, are reported to be in excess of $1.5 billion. The company expects to report earnings of $275 million to $300 million for the second quarter.

A jubilant Lee A. Iacocca, Chrysler's chairman, says he hopes the action will give the company access to conventional financing and send a message to car buyers that, in the chairman's words, Chrysler is ''here to stay and have the strength to compete with anybody in the world.''

Overall, the company made a profit of $170 million last year, although it had a slight operating loss because of a strike at its Canadian plants. The profit was the result of selling its tank division to General Dynamics.

Mr. Healy projects a $900 million tax-free profit for 1983 and a resumption of federal tax payments in 1985. Chrysler still has a $2.1 billion long-term debt, however.

In fact, chairman Iacocca is in a tough spot. To keep up the value of the company's stock and open up avenues to both debt and equity financing, it is important for him to hype the company's performance, analysts say.

But every time he does it, the UAW raises its eyebrows. When Mr. Iacocca talks about reviving executive bonuses and stock dividends, the workers ''hear him talking.''

Chrysler has increased its market share from 11.9 percent of domestic sales to 13 percent in the last 12 months.

One thing that is likely to help Chrysler is its upstaging of both General Motors and Ford with its minivan, due out sometime next winter. It also beat its big competitors with the K-derived convertible. Yet within a year both GM and Ford will have minivans, and so will the Japanese in a big way. The Japanese product, in fact, already exists.

Chrysler's collapse seemed imminent less than three years ago, and only the fast footwork and convincing appeal of the charismatic Lee Iacocca saved the corporation from pitching over the cliff.

In rescuing the battered auto company, he brought in a vast array of automotive talent, largely from Ford, from which Iacocca himself was fired by Henry Ford II a few months before.

Almost the entire top echelon of Chrysler executives was formerly with Ford.

Meanwhile, Iacocca has his top team in place as he sets up the ''office of the chairman,'' seen as a move to zero in on a successor when he finally decides to step down. Iacocca, however, denies he'll walk away from the job anytime soon.

If the demand for new cars continues, Chrysler appears to be in a strong position to get its share. But if the public looks the other way, the company could again go into a spin.