Legislation to permit up to $1.5 billion of federal loan guarantees to the ailing Chrysler Corp. was approved by the House Banking Committee last night, but the administration-backed plan appeared headed for trouble in the Senate.
The House committee vote was 24 to 17, much closer than had been expected, and Rep. Jim Leach (R-Iowa) forecast that when the Chrysler package reaches the House floor after Thanksgiving, "it's going to be very close."
Moreover, several controversial amendments were added by the House committee while Chrysler Chairman Lee Iacocca testified 3 1/2 hours across Capital Hill in front of a highly critical Senate Banking Committee.
Revealing that 200 of his 5,000 dealers already have filed for bankruptcy in the last 60 days, Iacocca warned that time is short to stave off failure by the country's third-largest auto manufacturer.
In later testimony before the same panel, administration inflation spokesman Alfred Kahn repeated his controversial statements of the past week that the United Auto Workers union will have to make additional sacrifices to help save the company, in the wake of what he described as a recent wage settlement that exceeded wage increase guidelines.
One possible union sacrifice would be to require that the UAW buy stock in Chrysler -- which was adopted as an amendment in the House committee yesterday by a 25-to-14 vote. The bill would force the firm to sell an estimated $50 million of voting stock to its workers and contribute an estimated $25 million of stock to an employe trust account.
Guaranteed loans to Chrysler would be cut off unless this employe stock ownership plan was established within six months, under the amendment sponsored by Rep. Stanley Lundine (D-N.Y.). Chrysler and Carter administration officials have been lukewarm about the employe stock purchase requirements.
But Iacocca told the Senate panel yesterday that his firm faces a potentially fatal loss of confidence among customers and creditors without quick action on the aid request, even though he conceded that between 50 percent and 70 percent of the reasons for Chrysler's current predicament could be attributed to previous management failures.
"The recent events in Iran, the weakening of our economy at home, the rise in interest rates and the continued speculation about Chrysler's viability make it imperative that the Congress act quickly . . ." he declared.
But many members of the Senate panel expressed serious reservations about the government's aid proposal and committee approval may not be as easy as Chrysler supporters have assumed.
Sen. Adlai E. STEVENSON (D-Ill.), in particular, denounced the aid measure in strong language yesterday. More opposition came from his colleagues on the committee as well as both the National Association of Manufacturers and -- for the first time -- the influential Business Roundtable, an organization of the country's business elite.
Separately, banking industry sources confirmed that banks with loans outstanding to the country's tenth largest industrial corporation are deeply split on the subject of extending new credit to Chrysler, which has forcast a net loss this year of $1 billion.
Stevenson's denunciation of the Chrysler aid package was a sharp blow to the company, partly because he represents a state with the company's sixth-biggest concentration of workers and partly because of his strong language. Tension between supporters and opponents of Chrysler aid on the Senate panel increased visibly after Stevenson spoke.
"The proposed 'fix' for Chrsyler unities all the worst facets of government meddling in industry's fortunes . . . a short sighted reaction to economic necessities with political expediences. It is think on constructive ideas," Stevenson asserted. Stevenson has announced he will not seek re-election to the Senate.
The Illinois Democrat argued that the proposed guarantees "guarantee nothing" and forecast that passage of loan guarantees now would only postpone a bankruptcy until 1981. ". . . The path of least resistance, it seems, is to demand that the public accept the risks and cover the costs which those with a more direct stake in Chrysler's fate have declined," he said.
If Congress acts now to rescue Chrysler, "it will be more difficult to refuse more," said Stevenson, who also revealed that he will offer substitute legislation to provide relief for the thousands of workers who would lose their jobs in the event of a Chrysler collapse.
Sen. Donald W. Riegle Jr. (D-Mich.), the Senate sponsor of administration loan guarantee legislation and the company's most vocal supporter on the committee, called Stevenson's attack a "serious misdiagnosis of this problem."
Standing that both the national economy and Chrysler are in "desperate shape," Reigle countered: "We cannot respond by talking about some dream for a future plan" to deal with general weaknesses in industry.
Later, Riegle became engaged in a bitter exchange with committee chairman William Proxmire (D-Wis.), over discussion of a new government report which disputes Chrysler's often-stated contention that larger auto companies faced lower costs per car to meet federal regulations.
Riegle spoke of "hypocrisy," a possible reference to Proxmire support for legislation to help American Motors Corp. (which has a major plant in Wisconsin) and added: "I hope we won't go off chasing rainbows."
Proxmire has opposed the Chrysler aid in strong terms although he has forecast eventual congressional approval, with some modifications.
Testimony from other senators yesterday, however, suggested growing skeptcism about the degree of aid to Chrysler from some of the parties that would be most affected by a company failure -- stockholders and United Auto Workers union members.
Proxmire and Sen. Jake Garn (R-Utah) condemned the UAW's proposed contract with Chrysler as not representing a "genuine sacrifice."
Administration inflation-fighter Alfred Kahn told the committee that while he favors quick action on the current legislation, as proposed, he remains convinced that the UAW settlement is "just not enough."
He told the panel that while the UAW's agreement to postpone more than $200 million of wages and benefits "are obviously substantial," they don't compre with the $1.3 billion in estimated total costs to Chrysler of the three-year contract.
Kahn vowed to "scream like hell" if Secretary of the Treasury G. William Miller doesn't take into account an insufficient contribution from the UAW if that is the final judgement of Kahn's Council on Wage and Price Stability about the Chrysler contract. "I can assure you . . . that he will insist that the contributions be genuine," Kahn stated.
Garn compared the $1.5 billion loan guarantee request with the $1.3 billion added wage costs to Chrysler and concluded that the taxpayers are being asked "to guarantee wage increases" for the UAW. Other senators agreed that the UAW had not made an adequate "sacrifice" and Proxmire said he would seek to add language to the bill that would require additional UAW commitments.