Chrysler Corp. has bowed to government pressure to provide free replacement of rusted front fenders on 1976 and 1977 Dodge Aspen and Plymouth Volare cars at a potential cost of $45 million.
Federal Trade Commission officials, who announced their settlement with Chrysler yesterday, defended the timing of the action, in the middle of a campaign to save the third-ranking automaker from financial collapse.
"It's in their own, long-term best interests," said Tracy Westen, deputy director of the FTC's bureau of consumer protection.
The settlement by Chrysler is voluntary, Westen noted, and should strengthen customer confidence and loyalty toward Chrysler products.
Chrysler set aside $45 million last year to cover potential claims for rust damage on the Aspens and Volares after the FTC began an inquiry; therefore yesterday's announcement does not represent a new financial setback for the automaker.
But the outlook for Chrysler did not improve yesterday. The company disclosed the breakdown of negotiations to sell an interest in Chrysler Financial Corp., which provides financing for the sale of Chrysler products. f
Chrysler had hoped to raise $320 million from the sale of a majority interest in Chrysler Finance. Household Finance Corp., a prospective buyer, broke off negotiations, concluding a sale would not be appropriate "at this time," a Chrysler spokesman said.
The Carter administration Thursday released the first of its periodic reports on Chrysler's progress in raising private funds to qualify for the $1.5 billion in federally-guaranteed loans approved by Congress.
The report indicated some serious differences between the administration's loan guarantee review board and Chrysler over the makeup of the outside support -- particularly the issue of whether Chrysler's creditor banks should advance new loans now to the automaker, when it is unable to pay its existing debts.
Chrysler said it will need $500 million in government-guaranteed loans to get through the next six months, before its new line of front-wheel cars come off production lines. The new line represents Chrysler's hope for the future.
The FTC said its settlement with Chrysler could affect 200,000 Aspens and Volares, one-fifth of the total produced by Chrysler in 1976 and 1977. To qualify for free replacement, the fender must have rusted on the top near the windshield, where a design defect permitted salt water to accumulate during winter driving, causing severe erosion, the FTC said.
The FTC also charged that Chrysler earlier had been willing to replace the rust-damaged fenders only to customers who complained hard enough.
Although the settlement does not take effect for 60 days, Chrysler may be ready to begin making replacements now, Westen said. The agency released a copy of a letter Chrysler is sending to Aspen and Volare owners offering the fender replacement.
The Chrysler notices are being mailed to Aspen and Volare owners in 16 northern and central states and parts of Maryland, Minnesota and West Virginia, areas where salt is heavily used on roads in winter.
The replacement offer applies to all 1976 and 1977 Aspens and Volares nationwide, provided the rust problem occurred before a car was three years old.
The design problem was corrected beginning with the 1978 model year cars.
Meanwhile, consumer advocate Ralph Nader yesterday renewed his demand that the Transportation Department recall nine million Ford Motor Co. vehicles that he said have dangerously faulty transmissions.
Nader said the transmissions can slip from "park" to "reverse" while the vehicles are idling, sending the vehicles backward.
The National Highway Traffic Safety Administration is investigating Ford transmissions in vehicles with six-and eight-cylinder engines of 300 cubic inch displacement or larger, to assess the potential hazard of slippage.
Hal Parris, an agency spokesman, said "This has been a very complicated investigation because the transmissions have been in so many cars for so many years . . . We certainly hope that this investigation will be concluded in the very near future."
Nader charged the administration was sitting on the investigation, out of concern for its impact on Ford's profits. He did not offer evidence of such action by the administration.
Roger E. Maugh, director of Ford's automotive safety office, responded, "I don't think DOT can be accused of going easy on us. They could close this case; they have chosen not to do so."
Ford contends any transmission slippage that has occurred has been the fault of drivers who fail to put the gear shift firmly in the "park" position.