The chairman of the House Banking Committee said yesterday he will back a federal loan guarantee to help Chrysler Corp. and one or more foreign companies produce small cars in the United States.
Rep. Henry Reuss (D-Wis.) made the statement as the Chrysler Loan Guarantee Board, created by Congress last year to administer a $1.5 billion guarantee granted Chrysler, met to consider Chrysler's financial plan.
"Every indication is that the board is having problems responding favorably to Chrysler's proposal, because repayment for the loan cannot be reasonably assured, because the contributions required from the banks and from Chrysler itself are not in place, and for other reasons," Reuss said.
A spokesman for the Treasury Department said no decision on the Chrysler plan is expected immediately.
Legislation passed by Congress last year requires Chrysler to come up with $1.43 billion from banks, dealers, suppliers and other sources in order to qualify for the $1.5 billion in federal guaranteed bank loans.
Roger C. Altman, assistant treasury secretary for domestic finance, said March 31 the government expects to know in four to six weeks whether the financially troubled automaker has qualified for the guarantee.
In New York Chairman John F. McGillicuddy of Manufacturers Hanover Trust Co. said Chrysler and its 15 biggest banks hammered out a pact Wednesday in Detroit under which lenders will reduce, defer or erase payments due to Chrysler.
The concessions are key elements in the financing that Chrysler, which is fast running out of cash, must arrange to obtain $1.5 billion in federal loan guarantees.
Despite the agreement, McGillicuddy said at the annual meeting of Manufacturer Hanover's stockholders that continuing negotiations on the rescue package were "at a very delicate point." He referred to the approvals still needed from Chrysler's smaller lenders and from the federal board set up by Congress to oversee the loan guarantee.
In Washington, the loan guarantee board received the proposed financing pact and began a review before submitting a recommendation to Congress.
McGillicuddy refused to detail elements of Chrysler's agreement with its major lenders but American Banker, a respected trade publication, reported today that it called for $712.4 million in "contributions" from creditors over four years.
Under the pact, Chrysler agreed to sell 51 percent of its Chrysler Financial Corp. subsidiary to the major lenders if another buyer had not been found by the end of 1981, American Banker said.
The option for a majority of Chrysler Financial would enable lenders to force its sale if Chrysler does not find a buyer on its own. An earlier attempt by Chrysler to sell control of the credit subsidiary to Household Finance Corp. floundered.
American Banker said the lender's agreed to give up $214.4 million in interest, defer $274.9 million in interest payments, erase $153.7 million in the principal amount of their loans and forego another $69.4 million in interest that would be owned on the deferred interest.
Chrysler announced Thursday in Detroit it will continue its $450 rebates on four 1980 models through April 30. The rebates, originally scheduled to expire April 10, are offered to customers who test-drive a 1980 Chrysler Mirada or Cordoba and Dodge Diplomat or LeBaron and buy the vehicle within 30 days. If a customer test-drives one of those models but purchases a car from another U.S. auto company, he still receives $50.