Executives of the troubled Chrysler Corporation say it is now "conceivable" -- not probable, but a slim possibility -- that the automobile manufacturer may never have to borrow a penny of $1.5 billion in government backed loans approved recently to keep the company afloat.
More likely, Chrysler will end up borrowing only a relatively small amount of the guaranteed loans -- perhaps up to $300 million.
"We chuckle about it, the irony of the situation," said Wendell Larsen, Chrysler's vice president for public affairs and the company man credited with behind-the-scenes lobbying here to win Uncle Sam's financial backing.
The irony is that Congress is approving government-backed loans, required Chrysler first to obtain commitments of some $2 billion in nonfederally guaranteed assistance from banks, creditors, dealers, suppliers, employers and state or local governments. Only then, starting April 1, would the U.S. Treasury back bank loans to Chrysler.
All along, Chrysler and its consultants have said that at peak levels, the maximum of new funding required would be about $2 billion (in 1983).
And now, even as the new U.S. Chrysler Corp, Loan Guarantee Board is setting up shop and preparing to monitor business at the nation's 10th largest industrial corporation, pieces of the outside financing puzzle are being put together rather smoothly, and Chrysler's nearterm outlook is brighter than at any time in a year.
"The [Chrysler aid] bill just did it by itself," Larsen said in a Detroit interview last week, noting that his company's sales picked up strongly as soon as the legislation passed Congress and consumers apparently became convinced they would not be struck with new cars that couldn't be serviced adequately in the future.
Similarly, once the federal government agreed to keep the company from bankruptcy courts, the United Auto Workers union agreed to an unprecedented and substantial reduction in wage gains already cemented by contract, and other support is falling in line.
Two specific developments yesterday emphasized this new twist to Chrysler's financial fate, less than a week after the automaker reported a $1.1 billion net loss from operations in 1979, the worst performance ever by a private business enterprise:
In Tokyo, Mitsubishi Motor Corp, signaled the resumption of more friendly relations with Chrysler by agreeing itself to finance the imports here of subcompact cars manufactured by Mitsubishi and sold in this country as Dodge Colts and Plymouth Champs. The agreement yesterday covers shipments through the end of March, while negotiatons continue with Japanese banks and Chrysler on resuming financial credit that the banks suspended last year.
Separately, in Wilmington, Del., Gov. Pierre du Pont IV kept alive his state's history as the "first state" by signing a $5 million Delaware aid package for Chrysler -- the first of half a dozen states expected to take smiliar steps.
The $5 million will be a loan to the company from state surplus funds, allowing Chrysler vehicles to be added to the state's car fleet in lieu of interest payments. Some 4,500 workers are employed at Chrysler's car assembly plant in Newark, Del.
"This is an occasion with a little bit of cause for celebration," du Pont said as he signed the measure. "It's only a little bit because none of us will be completely happy until Chrysler's making a lot of automobiles that sell well, and we get our money back."
Altogether, states and local governments are supposed to provide $250 million of Chrysler's new financial support.
The Indiana legislature is acting this week on a package of up to $35 million. Missouri ($25 million) and Ohio 20 million) are expected to be signed up by the end of the month and the city of Detroit has approved a $28 million grant.
In Illinois, the legislature doesn't convene for a month but a $20 million package is in the works. A $3 million Alabama plan is lined up and talks are in progress on renegotiating a New York State package of up $20 million for plant expansion.
Altogether, direct loans, grants or pension fund investments from these states -- where Chrysler has principal plants -- may be oversubscribed at $275 million.
Other elements of the Chrysler aid plan and action to date include:
The UAW's agreement on contracts that provide concessions of $462.5 million from the pattern set at General Motors Corp., plus an agreement with non-union workers on concessions of $125 million.
A plan to sell $250 million of Chrysler decentures to suppliers and dealers is moving forward and would exceed a requirement to raise $180 million from these sources. The subordinated debentures will be convertible to preferred stock when the company can pay dividends and company surveys have shown there will be no difficulty in selling the issue.
The Canadian government is studying a variety of grants, loan guarantees or tax reduction and plant building plans that could provide up to $300 million to Chrysler.
Still to be resolved are agreements with U.S. and foreign banks on new credit extension and possible income from selling assets. But, if the outside financing picture continues to be favorable, the company may not have to dispose of many assets to reach the requirements imposed by Congress.
The company has some real estate in the U.S. and Canada worth some $100 million and stock in Peugeto-Citroen of France worth some $200 million, which could be sold. Chrysler Financial Corp., a valuable entity, could be divided between Chrysler and another company in a joint venture and the New Process Gear Division in Syracuse, N. Y., could be sold to raise money.
As for the banks, netotiations are in progress every business day but no final accord with these institutions is expected until all of the other financing plans are final. The banks are supposed to provide $500 million of new loans or "concessions" on current debts.
A committee of 14 bankers represents the financial institutions in the Chrysler talks and one banker said there is "no question" an accord will be reached, if for no other reason than to project investments to date.
The government loan board, meanwhile, began meeting a month ago on a fortnightly basis. An initial task of the loan board will be to certify that Chrysler is a going concern, for which a number of outside consultants have been hired.
Chrysler's remaining major challenge is to prove that it can compete. Based on consumer surveys, the company recently dusted off an idea first suggested four years ago -- money back guarantees -- and offered them to the public as part of a broader marketing package.