Driving for a Rescue Deal

A recovery plan intended as a bid for aid

The ailing Chrysler Corp. has been using $400 rebates and the pitching of Joe Garagiola to whittle down its huge inventory of unsold cars for a month now, but the firm's most important marketing drive is just beginning. Late last week the nation's No. 3 automaker submitted to Treasury Secretary G. William Miller a 27-page recovery plan with 90 pages of exhibits that laid bare inside details on profitability and marketing strategy of a kind that no automaker had ever before revealed. Said one Chrysler official: "We are really taking our pants off on this one."

The plan is intended to prove that Chrysler can be brought back to financial health and is thus eminently deserving of federal aid. The document outlines a five-year strategy. Although President Lee lacocca had said earlier that Chrysler's third-quarter deficit would be "at least double" the $207 million that it reported for the second quarter, bringing the cumulative red ink for the year to about $800 million, the report projected that the total 1979 loss would come to a truly scary $1.073 billion on revenues of $12.4 billion. The company expects to lose another $482 million next year, then move back into the black in 1981, when it projects a profit of $383 million on sales of $ 15.6 billion.

But even with the bank borrowings lined up by Chairman John Riccardo and cost-cutting measures that have already saved $650 million, Chrysler will still face a cash shortage of $2.1 billion between now and 1982. The company has "some confidence," the report says, that it can raise $900 million, probably through further sales of assets and some breaks on wages, prices, and loans from its unions, suppliers and banks. But the remaining $1.2 billion will have to come from the Government in the form of an immediate loan guarantee of $500 million and a $700 million "contingency" loan guarantee because, the report states, Chrysler could raise only $700 million itself "under the most favorable circumstances."

Chrysler will remain a full-line auto and truck producer. Among other options it says it rejected was to make only small cars; given its high fixed costs and the low prices it would have to charge, it would lose $43 for every such car produced in 1982. But the company does plan to reduce the number of basic car lines from five to three. Moreover, by 1985 all Chrysler cars will have front-wheel drive, a space-saving feature that only its fast-selling, American-built Omni and Horizon subcompacts have now. The company's basic goal is to expand its 10.2% share of the U.S. auto market to 12.4% by 1985, mainly by concentrating on small-car sales.

To buttress the pitch for Government aid, the report features a somewhat lurid accounting of what would happen if the company went bankrupt. The total cost to the nation, Chrysler says, would be $16 billion. Some 400,000 workers could not only lose their jobs, but they could also remain unemployed long enough to require unemployment benefits totaling $1.5 billion. As many as 35,000 workers, most of whom are black, could be laid off in Detroit alone. Yet these estimates seem exaggerated, because it is highly unlikely that the company would ever shut down totally. At worst some plants would close, but many would go right on operating.

The report also suggests that burdened as it is with the high costs of meeting Government regulation and its own indebtedness, Chrysler is not a realistic candidate for merger. As lacocca protested earlier last week, "Nobody's asked!"

The Treasury Department is expected to prepare a loan-guarantee package. If it seems workable and Capitol Hill is satisfied with the sacrifices outlined, Congress will probably approve it.

This file is automatically generated by a robot program, so viewer discretion is required.