On the eve of Chrysler Corp's formal request to the federal government for financial aid, the ailing automaker's directors announced yesterday that they have taken a 25 percent cut in the fees they are paid by the company.
The action by Chrysler's 13 outside directors is the latest and smallest in a series of cost-cutting moves the No. 3 auto producer has taken in recent weeks to conserve cash and convince the administration and Congress it is doing its part to bring the company back to financial health.
But Chrysler officials say they cannot make it unless the government gives them financial aid to bridge the gap between the 1980 and 1981 model years. By the 1981 model year-- which starts in late September 1980 -- Chrysler says it will introduce new cars that will enable the company to be competitive in the U.S. market again.
Treasury Secretary G. William Miller has said that the administration might be willing to support loan guarantees for Chrysler, but that the guarantees would not be as much as the $1 billion the company originally asked for.
Miller said, however, that the administration would make no decision until Chrysler presented the Treasury with a detailed financial plan, outlining the steps the company is taking to bring itself back to health and demonstrating that there is reasonable assurance the company will not go bankrupt even with federal help.
Congress would have to authorize any loan guaranttes, and sources at both the House and Senate Banking Committees say that most legislators are reluctant to give Chrysler assistance.
Treasury and congressional sources say they expect Chrysler to present its plan to the Treasury either late this week or early next. Chrysler will make no official comment.
Chrysler Corp lost more than $260 million in the first six months of this year and company officials have said privately that the nation's 10th largest industrial company could lose as much as $600 million to $700 million in 1979.
For the last two years the company has been stripping off many of its less profitable operations to generate cash and recently agreed to sell its profitable real estate subsidiary.
Chrysler's two top executives -- Chairman John J. Riccardo and Lee A. Iacocca have voluntarily cut their salaries from $360,000 to $1, although they can recoup their lost income based on a complicated formula related to the performance of Chrysler stock over the next two years.
The company also cut the salaries of white collar employes from 2 to 10 percent, but like Iacocca and Ricardo, these employes may be able to regain lost wages. Nearly 30,000 Chrysler blue-collar workers are on indefinite layoff.
The 13 outside directors earn $10,000 a year plus extra fees for attending meetings, being on committees or chairing committees. They voted to reduce their basic fee by 50 percent to $5,000 a year.
A spokesman said that results in an effective pay cut of 25 percent because of special fees.
Chrysler also launched a massive campaign to sell the 80,000 cars and trucks it had in inventory on Aug. 1. Those vehicles were valued at about $700 million and cost Chrysler $2 million a week to keep.
The company has offered large cash discounts to its dealers who buy big car, and trucks from the auto maker and also is giving $400 rebate checks to consumers who buy Chrysler.
Chrysler sales have grown sharply since the program began Aug. 18 and the company says its backlog of unsold cars has been whittled down to 29,000.
In the last 10 days of August, when domestic car sales were 15 percent below those of late August 1978, Chrysler sales rose 23 percent and its share of the domestic car market rose to more than 18 percent from the 10 percent level it achieved earlier in the summer.
Although the rebates and discounts have cut sharply into the profits the company makes on each car (in come cases the company might lose money), the company is still better off selling at a small profit or a loss than holding on to hundreds of millions of dollars worth of unsold cars.