All the king's horses and all the king's men are trying to put Chrysler together again.
Platoons of lawyers, bankers, government officials and Chrysler Corp. representatives have been meeting in New York, Washington, Detroit, Canada and Australia -- often around the clock -- trying to find enough money to keep Chrysler alive in 1980.
The critical, immediate problem has been to staunch a hemmorrhage of cash from the stricken auto manufacturer. In a few days, Chrysler is expected to report an operating loss of nearly $400 million for the first three months of this year, following a $1.1 billion loss for 1979 that was the worst ever for an American corporation.
Chrysler lives on cash. At one end of the long arterial system are its 19,000 suppliers, from big steel and tire companies such as Bethlehem and Firestone to small providers of special parts. Chrysler must pay its bills to them every 60 days.
Thousands of truckers haul the parts to Chrysler's scattered subassembly plants and then the 42 major assembly plants which produce Chrysler cars. These are shipped to 4,300 Chrysler dealers who pay the parent company, permitting Chrysler to pay off its employes and suppliers, and the cycle begins again.
At any one moment, there may be $4 billion in the system flowing among suppliers, dealers and assembly plants. Most of the flow is borrowed money.
Industry sources say Chrysler could collapse in four hours if creditors demanded payment on major outstanding loans.
The auto company has been kept alive so far primarily by the fear of the unpredictable consequences of a bankruptcy, industry experts say. In their worst scenarios, a bankrupt Chrylser could be the loose cannon on the deck, smashing wildly around financial markets as creditors scrambled to protect themselves, lawsuits multiplied, 80,000 Chrylser employes lost their jobs and dealers faced personal bankruptcies.
It was to forestall such a collapse in the midst of a recession and a presidential election campaign that the Carter administration and the Democratic congressional leadership pushed the Chrysler rescue plan through the House and Senate in December.
After four months of negotiations by the company, its creditors and government officials, a financial aid plan is close to approval by the Chrysler loan guarantee board, headed by Treasury Secretary G. William Miller. According to Miller, the main remaining obstacle is a dispute between Chrysler and Canada over terms of $250 million in aid for the auto company from Canadian federal and provincial governments. Canada wants a commitment that Chrysler will maintain set levels of employment in its facilities there, but Chrylser hasn't been willing to go that far.
"This probably will be one of the most complex financial closings in history if it comes about," Miller said last week as the loan board awaited progress in the Canadian-Chrysler negotiations.
Miller and his colleagues on the Chrysler loan board presumably will approve the plan if they possibly can under the terms set by Congress.
The aid plan is the key to Chrysler's survival during the balance of this year. Congress agreed in December to guarantee $1.5 billion in new bank loans to Chrysler, provided the auto company could obtain wage and pay concessions of nearly $600 million from its employees, and $1.43 billion in financial aid from banks, and others with a direct stake in Chrysler's future.
Without government guarantees, there woul be no new loans to Chrysler, the banks have made clear.
Last week, with Chrysler on the brink and starved for cash, and the loan-guarantee negotiations deadlocked over the Canadian issue, the State of Michigan intevened to save the auto company.
On Wednesday, the state loaned Chrysler $150 million, guaranteed by a mortgage on Chrysler's newly renovated plant in Trenton, Mich. "The State of Michigan has shown leadership. I've had commitments and assurances, but I've never seen a buck of cash until today," said Chrysler Chairman Lee A. Iacoca.
The Michigan loan is contingent upon approval of the aid plan by the loan guarantee board; thus a breakdown of negotiations would put Chrysler back on the danger list. But all sides predict an agreement.
If so, Chrysler will be saved this year.
Its future in 1981 will depend almost entirely on the success of two new compact, front-wheel-drive cars, the Plymouth Reliant and the Dodge Aries -- Chrysler's belated entry into the booming market for compact, fuel-efficient autos with front-wheel drive.
Chrysler has been spending $160 million a month to retool and rearrange its assembly lines to build the new modesl, code-named the K-body cars. The investment represents a radical restructuring of the nation's No. 3 automaker, which until last year had bet its limited chips on large cars, vans and trucks.
The Reliant and Aries are two feet shorter and 1,000 pounds lighter than the Volare and Aspen models they will replace. With a 35-mile-per-gallon rating, they will also consume one-third less fuel.
"If we can't do it with a brand new, stylish car that gets 35 miles to a gallon, then the world doesn't turn," said one Chrylser executive.
Some skeptics wonder whether the world will keep on turning without Chrylser and its K cars. David Healy, a leading auto industry analyst with Drexel Burnham Lambert, a brokerage firm, notes that General Motors Corp. has an 18-month lead on Chrysler in the compact, front-wheel-drive market with its line of X cars, and that foreign producers have strong positions.
No one knows how badly hurt the auto industry will be in the current recession. Chrylser's initial forecast was for sales of 11 million in 1981, a prediction the loan board didn't take seriously. Now Chrysler has told the loan board it predicts 9.8 million car sales next year and expects to capture one-tenth of the market, with the K cars and its Omni and Horizon subcompacts -- a little less than its share in its good years, recently. Those numbers would make Chrysler profitable in 1981, it has told the loan board. Whether car buyers will have enough confidence in Chrysler to make good the prediction is a big if, say Healy and other industry analysts.
The smaller K cars symbolize the overall truncation of Chrysler during the crisis, as it throws off ballast to stay aloft. Gone are most of its foreign subsidiaries. Its Australia division, which finally has become profitable, has been sold to Mitsubishi Motors Corp. and other investors, providing a vital infusion of $62 million. Its former European operations not belong to Peugeot-Citroen, and other financial and real estate holdings have been dealt off for a total of $320 million (counting the Mitsubishi sale), industry officials said.
Chrysler's domestic work force, which was 140,000 at the end of 1978, is now 83,100 with the latest layoff of 6,900 employes last week. The company has 41,600 hourly workers on indefinite layoff, some of whom could be called back to produce the new compact cars.
The Transportation Department privately predicts Chrysler's work force will shrink further, to 70,000, according to inducstry sources. Chrysler hopes it could increase if the K cars take off.
Saving Chrysler -- even in a shrunken form -- spares the economy from a major corporate bankruptcy this year, and perpetuates another competitor in a concentrated domestic car market. The Carter administration and a majority in Congress, at least, have concluded the results are worth gambling a potential loss of $1.5 billion.
Even if Chrysler can ride the K cars into a recovery over the next few years, however, its struggles have not ended.
The 1980s will be the era of the "world car." General Motors Corp., Ford Motor Co. and its foreign companies all have versions of the world car -- a light, compact car that can be assembled in many countries.
A pattern of joint ventures and cross-purchasing between companies is growing, according to industry analysts. A new study by the Massachusetts Institute of Technology, financed by the German Marshall Fund, notes: "Chrysler is buying engines and transmissions for its small cars from Volkswagen. Volvo is buying engines for its little Daf from Renault. British Leyland has entered into an agreement with Honda to built Honda-designed cars in the United Kingdom and market them throughout Europe, while the Japanese automaker will sell them in the rest of the world. e
"With the arrival of the world cars there will be no separate national markets. There will be one world-wide market with increasingly firece competition which only very big, well-financed, consolidated companies can hope to survive," the MIT study concludes.
If Chrysler is saved, it is not for a soft, easy life ahead.