A federal loan board supervising the financial aid plan for Chrysler Corp. will meet today under heavy pressure to approve a $2.9 billion assistance package for the No.3 automaker by the end of the week.
Chrysler is losing as much as $150 million a month during the current collapse of the automarket, according to industry analysts, and positive action by the government's Chrysler Loan Guarantee Board is the company's only hope of obtaining the funds it needs to continue operations.
"It is inconceivable that they would turn us down, and the worst thing that could happen would be delay," said Chrysler Vice President Wendell Larsen.
Chrysler is counting on an immediate infusion of funds from the State of Michigan which is willing to make a $150 million loan for interim financing. Chrysler would have to pledge its engine plant at Trenton, Mich., as colateral, giving the state a 15-year, 12 1/2 percent mortgage on the newly renovated plant.
The state won't make the loan unless the federal board approves the company's overall financial aid package. Under terms of the aid plan passed by Congress last year, Chrysler has to raise $1.43 billion in new private financial assistance to qualify for $1.5 billion in federally guaranteed loans. The board must be satisfied with the kinds of aid Chrysler has obtained and its long-term prospects for survival.
Chrysler is anxious for approval this week because it cannot begin drawing the $1.5 billion in new loans for 15 days after the board grants approval.
Industry sources speculated that the board might give "conditional approval" to the Chrysler aid package this week, to start the 15-day cycle, while requiring the company to make some final changes in the package.
Whether this would satisfy Congress, which insisted on the 15-day period to review the final aid plan, was questionable.
Whether or not last-minute conditions are attached, there is little doubt among industry and administration sources that the Chrysler plan will be approved.
Treasury Secretary G. William Miller, who heads the federal loan board, said last week he was encouraged by the progress in arranging financial assistance for Chrysler.
"I believe Congress was correct in deciding that it was in the interest of national economic policy to provide financial assistance to Chrysler," Miller said in an interview with the Detroit Free Press.
Yesterday Miller declined to say how he stands on the Chrysler plan. Treasury officials worked through the night Sunday to provide the documentation the board would need to submit to Congress in support of loan approval, and administration sources said they knew of no last-minute snags.
A major debate has persisted over whether Chrysler's creditors have contributed enough to the rescue plan. Congress wanted Chrysler's banks and other lenders to advance $400 million in new cash and credit. But with the company unable to pay $601 million in current debt, the lenders refused to provide new loans. Instead, some $650 million in interest concessions have been offered -- a qualified risk by the lenders because they would not receive interests payments if the rescueplan failed and the company were forced into bankruptcy.
Congress gave the loan board authority to revise the pieces of the rescue plan, which include contributions by Chrysler's creditors and dealers and the state and local governments where Chrysler plants are located. Whether they could overlook Congress' demands for direct new financial aid from the creditor banks isn't clear, industry and congressional sources said.