Profits keep on coming, 2nd quarter should be even stronger The good news: the Big Three U.S. automakers likely will earn even bigger profits in the spring quarter than they did from January through March. The bad news: Wall Street already has discounted for the good news. Escalating incentive costs, especially on passenger cars, will keep price/earnings ratios well below 10. Chrysler Corp. almost certainly will show improvement this quarter because a year ago it suffered a month-long strike that cut truck production by 89,000 units. Dodge Durango sales won't hurt profitability per vehicle, and there will be more Chrysler Concordes and Dodge Intrepids available. Ford Motor Co. may be the only one of the trio unable to match its year-earlier performance. But that reflects its spinoff of The Associates, which Burnham Investment Research Analyst David Healy estimates will take 17 cents per share away from Ford's second quarter net. If General Motors Corp. can avoid a prolonged strike it could beat last year's $2.1 billion second quarter, but its aggressive use of incentives could prevent that. "The year-to-year comparisons are getting tougher," says Mr. Healy, "but GM's stock repurchase will certainly keep its earnings per share looking strong."

Nissan warns profits fell 70% Nissan Motor Co. Ltd. warns that profits for the fiscal year ended March 31 will be about 70% below a year earlier. The expected results, to be released May 27, should be about (Yen)16 billion (or $121 million-US) compared with (Yen) 51.3 billion ($388 million-US) the prior year. Sluggish car sales in Japan were a major culprit, but Nissan officials say it lost (Yen)50.4 billion ($381 million-US) on the appraisal of its securities holdings, reflecting the sharp decline in the Tokyo stock market. After the announcement, Moody's Investors Service put Nissan's debt rating under review, with negative implications. The company is cutting six production days, or at least 10,000 vehicles, from its schedule for the April-through-June quarter at its Smyrna, TN, plant.

Honda names Yoshino CEO; Kawamoto retires Hiroyuki Yoshino will succeed Nobuhiko Kawamoto as president and CEO of Honda Motor Co., effective June 1. The move is not a complete surprise. Mr. Kawamoto, who has led Japan's third largest automaker for eight years, is 62. Traditionally Honda CEOs have retired at age 60. But there had been no clear indication that his succession was imminent. Like Mr. Kawamoto, Mr. Yoshino, 58, is an engineer by training. He spent four years from 1988 to 1992 in the U.S., during which he oversaw construction of the company's East Liberty, OH, assembly plant.

Chevrolet will offer bi-fuel Cavalier GM may be juggling model years to meet light-truck Corporate Average Fuel Economy (CAFE) requirements (see p. 37), but Chevrolet is striving to be environmentally correct by offering a version of the Cavalier sedan that runs on both compressed natural gas and gasoline. The bi-fuel car will have two fuel tanks, and will travel 160 miles (257 km) on natural gas before converting to gasoline, which will take it another 400 miles (644 km) on one tank. Production starts this summer. The two-fuel option will cost about $5,800, but that can be offset partially by fuel cost savings and tax incentives.

Ford triples '97 bonuses for Trotman, Nasser; expands stock options What works for the lead dogs should work for the rest of the pack. Reflecting last year's $6.9 billion profit and a 57% gain in its stock price, Ford roughly triples the 1997 bonuses paid to Chairman Alex Trotman ($7 million) and Global Automotive President Jacques Nasser ($3 million), the largest bonuses ever paid to Big Three executives. Total compensation for the two came to $10.7 million for Mr. Trotman and $4.1 million for Mr. Nasser. At their annual meeting May 14 in Cincinnati, Ford shareholders are expected to approve a plan that will make stock option incentives available to its top 5,200 managers. The options will be awarded based on the achievement of market share, cost-cutting, vehicle quality and customer satisfaction goals.

Chrysler cuts '97 bonuses, reflecting lower profits Chrysler paid Chairman Robert J. Eaton $4.9 million in salary, bonus and contributions to retirement and savings accounts for 1997, down 20% from his 1996 compensation. Included in the 1997 package was a $3 million bonus, a third smaller than his $4.5 million bonus for 1996. But Mr. Eaton's base salary rose 12% to $1.6 million. Vice Chairman Robert Lutz saw his bonus drop 43% to $1.6 million, but his salary increased 4% to $1 million. Chrysler's earnings for 1997 were $2.81 billion below '96, largely due to a 29-day strike at a Detroit engine plant. In the proxy statement for Chrysler's May 21 annual shareholders meeting in Englewood, CO, Chrysler discloses it paid only 60% of the total available for bonuses to its top 2,000 executives. They were rewarded, however, for achieving a targeted 20% improvement in vehicle quality.

GM's Smith earned $2.45 million bonus For helping the world's largest automaker generate a $6.7 billion profit last year, GM directors award Chairman and CEO John F. Smith Jr. with a $2.45 million bonus, 53% larger than 1996. His base salary for 1997 increased 11% to $1.75 million. The GM board also awarded Mr. Smith 275,000 shares in stock options, exercisable at $58.32 per share in three equal annual installments, starting in February 1998. GM stock has traded recently at close to $70. GM assigned a present value to those options of $3.9 million. Mr. Smith also exercised options in 1997 on which he realized a gain of $1.8 million.

Mustang is among '60s icons considered for a stamp The U.S. Postal Service wants to use a symbol of the '60s for its Celebrate the Century commemorative stamp program, and the Ford Mustang, introduced in 1964, is one of 30 icons in the running. The competition includes Motown Records, the Beatles, Martin Luther King's "I Have A Dream" speech and Star Trek's Mr. Spock. Voting is open through May. Ballots are available at all post offices. You also can vote on-line at http://stampvote.msn.com. The winner will be announced in July and the stamp will be issued in June 1999. "We're honored to have Mustang nominated," says Ross Roberts, general manager of Ford Div.

VW tops BMW's bid for Rolls-Royce Volkswagen offers Vickers PLC more than (Yen)400 million ($667.2 million--US) for Rolls-Royce Motor Cars Ltd. That's well above the (Yen)340 ($567.1 million--US) bid from Bayerische Motoren Werke AG. But Vickers officials have indicated they were satisfied with the BMW bid for reasons other than money. Vickers shareholders may have other thoughts.

JCI acquires Becker Group Johnson Controls Inc. will acquire privately-held Becker Group for between $550 million and $600 million, in a deal that expands JCI's product line to include interior door panels and broadens its manufacturing base in Europe. The deal is expected to close in late June. Becker, headquartered in Sterling Heights, MI, generates about 70% of its $1.3 billion in annual sales in Europe, where it acquired German interior supplier Happich Fibrit AG in 1996.