Chrysler Corp., buffeted by rising interest rates and skidding auto sales, told the federal government yesterday its estimated losses this year may reach $750 million -- $100 million more than it estimated just a month ago.
The auto company said it now believes it will need $500 million in federally guaranteed loans this year, $300 million more than its earlier estimate.
Chrysler's statement yesterday followed release of a pessimistic report by the Carter administration's loan guarantee board headed by Treasury Secretary G. William Miller, which is overseeing the congressional assistance plan for Chrysler.
The board warned that Chrysler has "significantly underestimated" its current losses and the amount of federal help it will need to survive this year. The statement later yesterday by Chrysler, was, in effect, a confirmation of the board's warning.
Congress has agreed to guarantee $1.5 billion in new loans for Chrysler, but first, the company must raise $1.43 billion in outside financial aid from sources acceptable to the loan guarantee board.
The board, in its first report to Congress, said Chrysler has made "considerable progress" in obtaining nonfederal finance assistance.
But the company's strategy for raising the $1.43 billion differs from the congressional plan in some important aspects, the board noted.
Significantly, the board did not reject the Chrysler strategy yesterday.
Chrysler's creditors so far have been unwilling to provide additional cash to the company, the board reported, noting that Congress has called for $400 million in new credits and cash from banks and other creditors. c
Instead, Chrysler said this month it has preliminary agreement from major U.S. and foreign creditors to waive or defer $650 million in interest payments owed by Chrysler on existing loans.
Chrysler has proposed borrowing at least $180 million from suppliers and dealers through the sale of subordinated debentures, a form of note that would be repaid only after Chrysler has paid off an estimated $2 billion in old debt, and the $1.5 billion in federally guaranteed loans it hopes to receive under the congressional aid plan.
The loan guarantee board noted that so far suppliers and dealers have shown an interest in buying only $65 million of the debentures.
Moreover, Congress has required that at least $50 million of the $180 million from dealers and suppliers should be funds on which no interest and dividends can be paid while federally guaranteed loans remain outstanding, the board said.
The debentures don't qualify on this count because they bear 12 percent interest, the board said. Chrysler has told the board that the no-interest, no-dividend provisions can't be met and should be dropped.
Chrysler proposes to close the gaps in its financing plan by selling $510 million in assets instead of the $300 million called for by Congress. Almost two-thirds of the $510 million would come from the sale of a majority interest in Chrysler Financial Corp. The board noted that the sale hasn't been arranged.
Chrysler also is expected to raise between $250 million and $299 million in government assistance from Detroit and eight states where Chrysler plants are located. Yesterday, the Illinois House Executive Committee approved a $20 million loan to Chrysler, clearing the measure for a vote by the full House. So far, none of the state and city governments have completed action on credits for Chrysler, although progress is being made, the board said.
The board set no deadline for final approval of Chrysler's $1.43 billion outside aid package.
Some observers see the current phase as a waiting game, with the banks holding off extensions of new cash and credit as long as possible, and the government holding back its approval in hopes of forcing the banks to yield.
A showdown may come sooner than expected because of the steep decline in auto sales.
A Chrysler spokesman said interest rate increases are devastating Chrysler dealers, who are paying an average of 20.5 percent interest on auto inventories currently compared with 13.5 percent in 1979. As a result, dealers have ahd to reduce inventories drastically, the spokesman said.