John H. Corcoran, City Manager of Cambridge, is smiling to himself these days. He still has his job.

Things looked gloomy for Corcoran six months ago when five liberals who had campaigned on their promise to fire him won a majority of seats in the City Council. Mayor Barbara Ackermann and Councillors Francis H. Duehay '55, Saundra Graham, Robert Moncreiff and Henry F. Owens III immediately began their search for a new City Manager.

The search has narrowed down to two candidates: Neil Peterson, the white former City Administrator of New Brunswick, N.J., and James Johnson, the black Deputy City Manager of Kansas City, Mo.

But the situation has fallen apart in the last three weeks. Owens, who is black, firmly maintains that Johnson has a better "track record" than Peterson.

Ackermann, Duehay and Moncreiff insist that Peterson is the better candidate because despite his age (28) he won the support of a substantial majority of those citizens who interviewed both men.

At Monday's Council meeting, Peterson failed to win the support of the Council by a 5-4 margin. Johnson lost out in a 7-2 vote.