Banking sources and auto industry analysts said Chrysler Corp. likely would have little trouble raising the additional $1.5 billion in unguaranteed financing needed to secure the equal amount of federal loan guarantees proposed yesterday.
The Treasury Department proposal, sent to President Carter yesterday, was seen by Wall Street analysts as the breakthrough the company needed to ensure its future.
"This proposed action, if approved, absolutely assures Chrysler's survival," said Donald Descenza, auto industry analyst for Donaldson, Lufkin. "There is no question they are going to make it."
"Things were not as assured with the original $750 million offer," he said, "but this looks like a sure thing.They should have no problem raising the additional money they need because investors can be reasonably assured that their investment is safe, and it will also doubtlessly offer an attractively high rate of return as well."
"This is the breakthrough day," said Arvid Jouppi, auto analyst for John Muir in Detroit. "Up until now there were only expressions of approval. This is the first time anyone has really put his name on a document."
Jouppi said it was even likely that the consortium of banks already holding much of Chrysler's more than $1 billion in long-term debt would invest further in the company.
If they don't, he said, "it raises the question of why they made the original loans, since these would clearly be a better investment."
At Manufacturers Hanover Trust Co., the lead bank handling Chrysler's existing debt, senior Vice President James Hambleton said, "We look on this as a very positive development," but deferred further comment until the banks have had a chance to study Treasury Secretary G. William Miller's proposal in detail.
Banking sources said, however, that the plan was viewed extremely favorable by most of those banks holding Chrysler debt. On Tuesday, Manufacturers Hanover Chairman John McGillicuddy told a House subcommittee that only a $1.2 billion guarantee from the government probably would be enough.
Several industry analysts said there would not also be many new sources of capital available to Chrysler -- even for the unsecured financing -- because of the extent of the proposed federal backing.
The company might go, for example, to the United Auto Worker's bloated strike fund for some of its funding, according to Descenza. Hundreds of millions of dollars earmarked for a strike that never took place presently sit in that fund and could be lent to the company.
"And various state and local governments where Chrysler has plants will probably now be willing to lend money," he added. "After all the company is a major employer and taxpayer in those places.
"The point is," Descenza said, "a loan to Chrysler or an investment in Chrysler is now probably a good bet, and with the extra security, the state governments can justify that investment."
John Muir's Jouppi said a "fair amount of the needed money will probably come from the governments of Canada and several states, notably Michigan, Indiana and New York.'
"A lot of people have been sitting on the sidelines waiting for this action," he said.
Jouppi said aid from the various governments could come in many forms.
"A city might assist the company by floating a municipal bond issue to buy certain machinery which it would then lease to the company to help it modernize production methods, for example," he said.
Other interested parties who might help the company out now include suppliers who will be willing to sell more to the company.
But Jouppi and others warned, if Chrysler goes as far as to borrow the additional $1.5 billion that would be allowed under the Treasury proposal, it would raise the level of the company's outstanding long-term debt to dangerously high levels.
With more than $1 billion in already outstanding long-term debt, and another $1.2 billion in unfunded pension fund liability, Jouppi says, Chrysler would be putting itself in a tough position by attempting to carry an additional $1.5 billion in paper.
"The company is setting some high hurdles it will have to reach to pay that debt off," he said. "It would have an extraordinary heavy interest burden, and would give little incentive for common stockholders, who would suffer most in the case of trouble."
Still, Jouppi concluded, the ultimate tale of the tape for Chrysler will be "if it can succeed in the market place." At least, he added, yesterday's Treasury action "makes that closer to reality."