Citicorp Chairman Walter Wriston said yesterday that he opposes the Carter administration's plan to rescue Chrysler Corp. with $1.5 billion of guaranteed loans while Manufacturers Hanover Trust Co. President John McGillicuddy said he can't guarantee that Chrysler's banks will approve additional loans to the ailing auto manufacturer.
Their combined testimony before the Senate Banking Committee was seen as damaging prospects for congressional approval of the loan guarantee package -- at least as proposed.
Committee Chairman William Proxmire (D-Wis.) said that McGillicuddy's testimony in particular is "devastating evidence that Congress should not approve a federal loan guarantee for Chrysler."
And Sen. Donald Reigle Jr. (D-Mich.), chief committee supporter of Chrysler aid, said that if the banks "hold back, it will make the job a lot togher."
Although McGillicuddy didn't say so yesterday, banking industry sources said the principal reason why he could make no further bank lending commitments for Chrysler is because of a severe split among the banks themselves.
According to these sources, some institutions want to go all out to save the company and thus help protect their own investments to date. Manufacturers Hanovers is in this group, the sources continued, and the New York bank, has been pressing other banks to agree at this time to additional lending.
But leaders of other banks with loans to Chrysler are said to be convinced that to become viable the auto company must agree to a radical change in its stated strategy of remaining a full-line vehicle manufacturer in competition with General Motors Corp. and Ford Motor Co.
"With careful planning, the company can be reduced in size, with small impact on employes and suppliers," one bank officer said of Chrysler."
In his testimony yesterday, Wriston questioned whether loan guarantees are in the long-term interest of the country because they represent an attempt "to move economic resources to places where they would not otherwise go."
The Citicorp chief, whose principal subsidiary is the nation's second-largest commercial bank and a lender to Chrysler, said the auto company should file for bankruptcy. Loan officers at Citibank "do not believe that if all the money went into this, there is a reasonable chance it will be repaid," Wriston added.
McGillicuddy, who has been acting as the spokesman for the consortium of some 200 banks with credit lines to Chrysler and its financing subsidiary, said yesterday that his institution is "not prepared at this time to commit additional sums . . . on an unsecured basis."
The U.S. banking system already has approved $1.5 billion of loans to Chrysler, "all of which is outstanding and unpaid, essentially all of which was borrowed with the last seven months, he added. Overall, banks in this country, Japan, Europe and Canada have about $4.8 billion of loans outstanding to Chrysler.
Assistant Treasury Secretary Roger Altman said in a letter to Riegle that was made public yesterday that among the "sacrifices" necessary for those with a stake in Chrysler's survival would be the purchase of new stock in the firm by banks and other creditors.
Under the administration's proposal, Chrysler must match the $1.5 billion of government-guaranteed loans with money raised privately. "While left to the company and its interest groups to negotiate, we expect Chrysler to obtain new commitments for assistance from all major constituents," Altman stated.
Other possible "sacrifices" to meet the extra $1.5 billion could be a requirement that stockholders continue to give up dividends and buy more stock; that suppliers liberalize credit terms; that labor unions make additional compensation concessions, make loans or buy stock; and that local governments make tax concessions, grants or loans -- some of which already has been pledged.
Wriston's testimony didn't come as a surprise to Chrysler officials because Citibank has been among the institutions opposed to further lending or waivers of current credit agreements.
Asked if it wasn't possible for the banks to agree on a share of matching
Funds toward the $1.5 billion McGillicuddy said he doesn't think it is possible prior to passage of legislation.
He also expressed concern about growing indications that Congress may require the government to have a senior position as lender to Chrysler, instead of allowing the Treasury to waive this position as proposed by the administration.
Although many members of the senate committee have been critical of the Chrysler aid plan, as have many witnesses, Proxmire forecast yesterday that some form of guaranteed loan legislation will be reported out favoraly by his committee and sent to the full Senate for a vote before Christmas.