The Senate Banking Committee last night approved legislation to aid the ailing Chrysler Corp. -- but only after substituting an unprecedented measure that would require United Auto Worker union members to give up wage increases they negotiated recently for the next three years.
On a 10-4 vote, the committee reported to the Senate a compromise bill written primarily by Sens. Richard Lugar (R-Ind.) and Paul Tsongas (D-Mass.), which mandates a wage freeze not only for hourly workers represented by the UAW but also for management employes.
At the same time, the legislation would require Chrysler to sell to its employes new common stock equal to about 40 percent of the shares that would then be outstanding in lieu of the foregone wages.
"In the event the company is successful" in its revival, said Lugar, "the workers will own a substantial portion of the company . . . it will be merited because they would have helped make it happen."
Over the three years involved in the proposed freeze, the total wage savings to Chrysler would be an estimated $1.32 billion.
The Lugar-Tsongas bill, passed after an all-day committee session, would trim the proposed federal government investment in Chrysler that is contained in legislation endorsed by the Carter administration. The new measure also would require banks to extend additional credit to the automobile manufacturer, which faces bankruptcy by the end of January without new financial assistance.
Although the new bill is radically different from the administration plan, supporters of aid to Chrysler said they were relieved by the speed with which the banking committee acted on legislation and they forecast ultimate congressional approval of an aid package.
Whether all parties would accept the strong medicine contained in the banking committee legislation is highly questionable, however.
A floor vote is expected by mid-December, at which time a number of tough battles on amendments are expected -- particularly over the controversial wage freeze, which the UAW is expected a fight strongly.
UAW President Douglas Fraser said earlier this week that only the "imminent collapse" of the nation's tenth largest industrial firm could prompt him to reopen negotiations with Chrysler, as the Senate legislation would. Other UAW officials said a three-year wage freeze could mean an effective 40 percent reduction in earning power given current inflation.
But committee chairman William Proxmire (D-Wis.), who voted against the final bill as a precedent that could lead to additional corporate bailouts, said that imminent collapse is precisely the situation now faced by Chrysler and that the wage freeze was necessary.
After several hours of debate on the wage issue, the committee voted to accept a key amendment by Tsongas that would permit a return to union wage increases in the third year if Chrysler has returned by then to a profitable posture.
Sen. Donald Riegle Jr. (D-Mich.), a principal supporter of the administration's $1.5 billion loan guarantee package that was dismissed earlier by the committee, said he will move on the floor to adopt language requiring workers to get contracted third-year increases unless a government board finds it not in the national interest.
Riegle expressed "serious reservations" about the committee bill but called it a "constructive approach" that could be amended later.
Proxmire emphasized that Chrysler's workers are being asked to "give up a great deal in a time of inflation." In exchange for the wage freeze, the committee approved an employe stock ownership plan requiring that $250 million of common shares be distributed to workers in lieu of wages. At current market prices of about $6 a share for Chrysler stock, this would require the company to issue some 42 million new shares to its workers on top of 66 million shares now outstanding.
The Senate legislation calls for a total package of $4 billion -- $1 billion more than ultimately proposed by the administation. Members of the panel argued that increased energy and economic uncertainties require a bigger cushion of money.
The government-guaranteed portion of the overall package would be reduced to $1.25 billion in contrast with $1.5 billion in the administration plan. Chrysler would have to raise an additional $2.75 billion of private commitments to permit any federal loan guarantees -- far more than the $1.5 billion proposed by the Treasury.
In specific language, the Senate Banking bill spells out the contributions required of all principal parties affected by Chrysler's financial crisis -- in addition to workers -- as follows:
U.S. banks, currently committed to more than $400 million of loans to Chrysler and its subsidiaries, would agree to $400 million of new loans as well as $100 million of concessions through renegotiation of existing credits.
Dealers and suppliers would provide a total of $180 million of new capital and price concessions.
State and local governments would contribute $250 million of loans, loan guarantees, or tax incentives.
Additional money would be raised through a required $50 million public offering of stock, diluting current stockholdes' shares; negotiations with Canada, for an estimated $150 million of assistance and the sale of some Chrysler assets to raise$300 million.