FOOL CONFERENCE CALL SYNOPSIS*
By Debora Tidwell (MF Debit)

Chrysler Corporation <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: C)") else Response.Write("(NYSE: C)") end if %>
1000 Chrysler Drive
Auburn Hills, MI 48326-2766
(810) 576-5741
http://www.chryslercorp.com

UNION CITY, CA. (January 31, 1997)/FOOLWIRE/ --- Chrysler Corp. reported record earnings for the fourth quarter on January 21st. It was their best ever quarter for operating earnings pre-tax and earnings per share, and also for revenue. Their shareholders continue to do well. In December they announced a 14% increase in the dividend, taking it from $0.35 per share to $0.40 per share. That is the 7th increase in the past 3 years. They also increased the 1997 share repurchase from $1 billion to $2 billion, bringing the total announced buyback program since inception to $5 billion.

RECORD US RETAIL SALES. Fourth quarter US retail sales were also the best in Chrysler's history, including 14 individual quarterly sales records. Forbes magazine named Chrysler "Company of the Year" while Businessweek named Bob Eaton and Bob Lutz among the top 25 managers of 1996.

EARNINGS. Their earnings were $1.727 billion before tax and one-time actions in the fourth quarter. Equivalent after tax earnings were $1.086 billion or $1.51 per share. There were 3 one-time adjustments during the quarter.

DEBT RETIREMENT. The first was the Auburn Hills debt retirement. They announced that two weeks ago and it resulted in a one-time charge of $191 million or $0.26 per share. They repurchased half of the certificates for $859 million. The premium on those high coupon bonds resulted in the $0.26 per share charge. They do anticipate that the retired certificates will be refinanced in the first quarter, subject to the normal caveats of market and economic conditions. The action will improve Chrysler's cost structure through lower interest expense in the future.

SOLD PENTASTAR ELECTRONICS. Second, they concluded the divestiture of their Chrysler Technologies unit with the sale of Pentastar Electronics on January 10th. That resulted in a writedown of $51 million or $0.07 per share in the fourth quarter. They completed the first phase of this divestiture in June of last year when they sold Electraspace Systems and Airborne Systems units for a gain of $101 million or $0.12 per share. The second and final phase was selling Pentastar. In anticipation of the sale, they took a $77 million pre-tax ($51 million after tax) writedown primarily related to the people cost associated with the transaction. As part of the sale, they agreed to retain their UAW employees. So, they had costs related to job security benefits, special early retirements, and some other employee costs.

RETIREE PAYMENTS. Finally, they had the lump sum retiree payments which are associated with the new UAW contract and some minor additional special early retirement costs resulting in a charge of $37 million or $0.06 per share in the fourth quarter. So, those adjustments bring the after-tax earnings to $807 million or $1.12 per share. The average of the analyst estimates was $1.43 per share.

RECORD PRE-TAX EARNINGS FOR 1996. For the full year, Chrysler had the best pre-tax earnings and earnings per share in the 71 year history of the company including record profits for Chrysler Financial. Sales were $61 billion, also a record. During 1996 they completed $2 billion of share repurchase (66 million shares), bringing the total to $3 billion (112 million shares or 14% of outstanding shares) since the program inception. In December the board approved $2 billion share repurchase for 1997 and a $0.20 increase in the annual dividend. Dividend payments for the year were $963 million.

INDUSTRY OUTLOOK AND PRODUCTION PLANS. The fourth quarter came in at seasonally adjusted sales of 15.2 million units for the industry as a whole. That did bring the full year ended at 15.4 million units about where they thought it would be. For 1997 they expect the industry to fall in the range of 15-15.5 units. Chrysler is planning first quarter production of 779,000 units on a worldwide basis, an increase of about 36,000 units compared with last year's first quarter. They introduced a new sport utility, the Dodge Durango and new Concorde and Intrepid sedans. The Durango will be launched with two shifts in September. Initial production will be about 110,000 units in the 1998 model year climbing to 200,000 units in the 1999 model year and beyond. The Concorde and Intrepid will have build-out of the current models in August and a launch with two shifts in September. Initial volume will be 200,000 units annually but they have the ability to go to 340,000 units on three shifts if they should need the vehicles.

CONCERNS FOR 1997. They have a few concerns for 1997. The stronger dollar could have an adverse affect on the Big Three in the US market relative to their Japanese competitors. It could also have a negative impact on Chrysler's growth overseas. They believe the current strength is not a long-term trend and that the dollar will begin to settle back to the structural level sometime in the second half of the 1997 year. They also anticipate that moderate growth in the economy will continue and that the Fed will not take any significant adverse actions on interest rates. But, that of course is a risk and they will watch it very closely. They are a bit concerned about the financial health of the customer, particularly the high debt levels and the losses they have seen in the economy, but they do believe that personal income growth and the rise of asset values more than offset that debt concern. Consumer confidence certainly remains very strong. All of the indicators are at extremely high levels. They also keep an eye on used car prices as a potential indicator of future new car demand and so far they have not seen any big impact from used cars on new car sales.

1996 UNIT SALES SET RECORDS. The 1996 calendar unit sales were also a record including 22 individual records, as was the 1996 model year with 12 individual sales records. In December their sales increase represented the 13th consecutive month that they had a year-over-year increase in sales.

LABOR AGREEMENT. They reached new 3-year labor agreements with the UAW and the CAW last September. The Harbor Study for 1996 declared Chrysler the low-cost producer in North America for the third straight year.

NEW MODELS. They successfully launched their new Jeep Wrangler, Dodge Dakota pickup, and redesigned Jeep Cherokee.

INTERNATIONAL GROWTH. They continued international growth highlighted by their substantial investment in various South Amebn/ rican projects including a joint venture with BMW to produce the 1.416 litre engines, their Dakota pickup project in Brazil which will launch in mid-1998, and their expansion in Argentina for Jeep Cherokee production also in 1998. They also acquired the vehicle distribution rights in France and Italy which will improve their margins and give them the increased flexibility they wanted for those markets. Last but not least, they have returned to profitability in Mexico.

1996 EARNINGS. So, for the full year, their pre-tax earnings before one-time actions were $6.280 billion, up almost $2.5 billion from the $3.8 billion earned in 1995. Reported net earnings for the year were $3.529 billion. Operating results of $5.21 per share were up 75% from last year's $2.97 per share. Reported earnings per share were $4.74 or 85% higher than last year.

EARNINGS PER UNIT. Worldwide earnings per unit for the quarter came in at $2,115. For the full year, the earnings per unit came in at 1,925 and that was an improvement of almost $700 per unit from the year ago levels.

PROFITABILITY. Their profitability continues to be strong by almost any criteria. Their return on sales came in at 7.2% for the quarter and 6.7% for the full year, a full 2 points better than last year. Return on net assets was 23% for the quarter when calculated on a rolling 12-month basis. That has improved a full 10 percentage points from the 13% they achieved in 1995. Average revenue per unit for the quarter was $19,900, about flat from the third quarter level but for the full year they realized about $19,600 per unit which is up $1,200 per unit from last year.

INCOME STATEMENT. Selling and administrative expense is higher than last year. That is primarily due to advertising cost. In the US to support the Dakota launch and in international markets they are starting to spend more to build vehicle and brand awareness. In addition, administrative and infrastructure cost to support their international sales are also higher for the year and the quarter. Employee retirement benefits costs are up primarily because of the peneion benefits associated with the new labor contract and a decrease in the discount rate which happened at year-end last year which caused pension and healthcare expense to be higher in 1996 than in 1995.

CASH FLOW. They began the quarter with $7.5 billion in cash. Operations generated $2.5 billion. Capital spending in the quarter was $1.4 billion. They repurchased $464 million of stock (13.8 million shares), made $251 million in dividend payments. The Auburn Hills debt retirement was $859 million. Their cash position at the end of the quarter was $6.9 billion. In addition, in the fourth quarter, they prepaid $1.1 billion of various 1997 non-pension employee benefits in the quarter for tax reasons. These actions allowed them to reduce their tax liability and also enabled them to earn a tax-free return on those funds that are in the various trusts. Looking at cash on a full-year basis, they started with $6.9 billion, their operating cash flow was $9.1 billion and allowed them to continue their aggressive product plans and they spent $4.6 billion of capital on that. They expect capital spending to be somewhere between 5-10% higher than 1996 in 1997. They used $3 billion of their cash for shareholder actions. They retired the Auburn Hill debt. They kept their pension plan over-funded with contributions of $800 million in 1996. They paid $300 million of profit sharing payments to their employees and still maintained $6.9 billion in cash at year end.

CHRYSLER FINANCIAL. Chrysler Financial earned $133 million for the quarter which contributed to their record year. For the full year, pre-tax earnings at CFC were up 12% compared with 1995. They have experienced some high losses at CFC, similar to those experienced by the banks and other financial services companies. They have implemented several steps to turn around that situation by improving the credit mix and the quality of the new paper they are writing now. More resources have been devoted to improving the collection process. The loss to liquidation ratio on the retail paper was 3.18% in 1996, up from 2.25% in 1995. They anticipate an improvement in losses going forward, as quickly as the first quarter.

NORTH AMERICAN UNIT SALES AND MARKET SHARE. North American unit sales for the full year were up 13% led by strong results in both the US and Mexico. Chrysler was the only full-line manufacturer to achieve double-digit improvements year-over-year in this category. In 1996, the Dakota, Wrangler, and Cherokee piled up a ton of various awards. They are sure the trend will continue in 1997 with their new Dodge Durango sport utility as well as the new Concorde and Intrepid just shown at the Detroit auto show. In the fourth quarter Chrysler had another terrific quarter for market share. They captured 16.1% of the US in the car and truck markets, compared to 14.9% last year. GM lost 3.2 percentage points and Ford gained a point in the fourth quarter. The Japanese gained 0.6 point and all other manufacturers picked up 0.4 point. For the full year Chrysler's car share in the US and Canadian market was 10% compared to 9.5% last year. GM lost 1.6% of market share, Ford lost 0.4%, the Japanese gained 0.5% and all other manufacturers picked up a full percentage point of market share. On the truck side, Chrysler did almost 24% of the US and Canadian markets in 1996, an improvement of more than 2 percentage points compared to 1995. Penetration levels for GM and Ford declined 1% and 0.7% respectively, the Japanese were up barely 0.1% and all other manufacturers were down 0.5%. They spent an average of $655 per unit on incentives, $115 less than in 1995.

FLEET SALES. Fleet sales accounted for almost 20% of total sales in the quarter, which is flat compared to the fourth quarter last year. For the full year, fleet business accounted for 19% of total sales compared with 15% in 1995. The reason for that is the improved margins in the fleet business and that makes this level well within Chrysler's acceptable range and is more timing than any major shift in their fleet strategy as they go forward.

MARKETING COSTS. Marketing costs expressed as a percent of automotive revenue puts Chrysler's costs at 7.1% in the fourth quarter, a little higher than normal but they had the advertising to launch the Dakota in the quarter and that made it a little unusual. For the full year, their marketing costs came in at 6.5% of revenue compared to 6.9% of revenue last year.

IN-STOCK LEVELS. The Big Three stock levels continue to be in pretty good shape. Chrysler's are at 481,000 units, down 12,000 units compared to last year. GM and Ford stocks have also declined from last year's levels. Days supply came in at 67 days which compares favorably with 77 days at GM and 69 days at Ford.

INTERNATIONAL SALES FOR 1996. International sales for the year were 222,000 units, more than 19% higher than last year. The sales increases were experienced all across the regions with the biggest increase coming from Latin America, Africa, and the Middle East, up 55%. Product-wise the increase was led by Grand Cherokee which was up 90% with the addition of right-habn/ nd drive models and higher production levels from Austria. Minivans were up 21% and Cirrus/Stratus/Breeze were up 59%.

ACCOMPLISHMENT SUMMARY. In most ways the fourth quarter was simply a reflection of the whole year. It was their best ever quarter, their best ever year for pre-tax earnings, for earnings per share, and for sales revenue. They set 14 different sales records in the quarter and 22 for the year. They repurchased $2 billion worth of stock during the year. In the quarter they announced that they would repurchase another $2 billion in 1997. They raised the dividend to $1.60. With the share repurchase and the dividend, they returned $3 billion to their shareholders in 1996 which they believe is the highest in the industry.

PROFIT SHARING. Employees at Chrysler will be getting profit sharing checks next month that will average $7,900 per employee, also the highest in the industry. They also repurchased half of their Auburn Hills bonds last quarter and plan to refinance them in Q1 with lower cost debt.

SALES ACCOMPLISHMENTS. Chrysler sold about 3 million units last year. They sold 100,000 units in Europe and think that is an important threshold for them as they expand internationally. Their international sales totalled almost 250,000 units and grew by 19.4% during 1996. They announced a plant in Argentina to build Jeep Cherokees and Grand Cherokees, one in Brazil to build Dodge Dakotas, and a joint venture in South America with BMW to build small engines.

UNUSUAL PERIOD FOR THE AUTO INDUSTRY. This is a very unusual period for the auto industry. It is the first time since they have been keeping decent records that they have had three consecutive years of similar industry sales -- no ups, no downs, just steady as a rock. Traditionally, companies haven't grown when the industry has been flat, they have grown as the industry came out of a downturn and then, all too often, have given up most of that growth when the cycle turned down again. Today the industry is flat, but roughly on trend, and that's a difference.

GOOD GROWTH PERIOD FOR CHRYSLER. For Chrysler it has been a period of consistent, profitable growth. In the three years that the industry has been on this course, Chrysler has increased their market share by 1.3%, doubled their international sales, increased their dividend by 433%, bought back $3 billion of their stock, completely funded and even over-funded their pension plans, retired or refinanced $1.5 billion worth of debt, and put $2.5 billion in the bank. Last year, Chrysler was the only one of the Big Three that gained North American market share in either car or truck, and they gained in both. They gained 0.5% in cars and 2% in trucks and they are pretty sure that their incentive costs were lower than the others, so they did not buy the share their products earned it. Market share is not one of the goals at Chrysler. They think of it as the reward for doing all the other things right. They believe that when you focus on market share you do some dumb things to get there. But, if you focus on the basics of producing great products and satisfying the customer, market share will take care of itself.

STRUCTURE SUPPORTS SUCCESS IN FLAT MARKET. Chrysler thinks a flat market is good for them, particularly if it's the right altitude and if they have the right products. They like the industry at 15-15.5 million units and that is what they see for next year. It is high enough to be very profitable and allows them to plan. They can match demand to capacity, map out future growth, and they will have additional capacity in 1997 to build, for example, 190,000 more trucks than they built in 1996 if the demand is there they can meet it. If it's not, they are not stuck with idle plants because they got most of that capacity by using their existing facilities. Specifically, their number for 1997 is 15.2 million units for the US market. Anything near that, or between 15-15.5 million units will be fine with them.

PLANS THROUGH NEXT RECESSION. Right now, they don't see anything but clear sailing ahead. But, they don't believe their eyes. They don't see any sign of recession, but they feel they have to act like one is right around the corner. They are prudently planning for the recession that they cannot see at this point. Sometimes they almost wish a recession would start tomorrow so we could get the darn thing over with. Things have been so good for so long that everyone out there is literally spooked. Chrysler thinks a recession would actually be an opportunity to prove once and for all that the company has a long-term business and product plan that will treat a downturn almost like another day at the office. In the past, Chrysler and the others have planned up to the next recession and then started over. Today, they are planning through the next recession and becoming more and more confident that they just might get through the next downturn solely on operating earnings and maybe use some of the $7 billion nest egg for those unique opportunities that always seem to be available in a recession if you happen to have some cash in your pocket.

PROFITABILITY IN DIFFERENT SCENARIOS. Chrysler showed slides depicting their "profit zone" based on the current break-even of 65% of shipments and two recessionary scenarios. A 10% drop in sales would squeeze the profit zone cushion from the top as they lost units and from the bottom as they increase incentives, to the tune of $500 per unit (their best guess of what would happen with a 10% drop in the market). Even with that, there was still plenty of cusion left. They also showed what would happen with a 20% drop in sales and $1000 per unit increase in incentives. Clearly they don't think this would be fun, but it wouldn't be a disaster either. They would feel it, but they wouldn't be forced to do anything to significantly stray from their business plan, even in this situation. They feel that a low break-even is the key and they intend to keep it low. But, they also have the flexibility to adjust for volume or mix changes quickly and at relatively minimum cost. They won't have the over-capacity problem that the company had going into the last two recessions. With their product line, they think they could reasonably excpect to see their market share go up, again without any specific share actions on their part.

KEEP PROGRAMS IN PLACE THROUGH BAD TIMES. But, that's just for starters. They also don't want to cut any product programs in a downturn or to go on any crash diet that would turn the company upside down. Continuous improvement is part of their plan. So, they are entering 1997 very happy with where they are, very sure that 1997 will be an even better year than 1996, committed to take advantage of this climate to create more growth for the company and outstanding returns for their shareholders, and absolutely confident that if there is an unforeseen dip in the economy or the industry, they will get through it without anything close to the pain they experienced in previous downturns.

* A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event. Note: Statements made by a company other than historical information may constitute forward-looking statements for which the company can claim protection under the Safe Harbor Act. Please consult the company's filings with the SEC for information on risk factors which might cause actual results to differ materially from the information contained in these forward-looking statements.