Chrysler Corp., facing another serious cash shortage, yesterday delayed a request for $200 million more in government-guaranteed loans after briefing administration officials on its latest plans for cutting production costs.
The company confirmed yesterday that it has asked its suppliers to accept delayed payment on deliveries of steel, parts and components this month as it fights the latest threat of insolvency caused by the surge in interest rates and a slump in car sales.
Chrysler officials did not divulge the cost-cutting steps they discussed yesterday in a closed meeting with the government loan board headed by Treasury Secretary G. William Miller.
But some new, tough measures will be required, government officials say, to deal with the latest setback for Chrysler and other domestic auto manufacturers caused by disappointing auto sales. Confronted by this bad news, Chrysler was expected to ask this week for up to $200 million more in guaranteed loans, on top of the $800 million it has already received.
Instead, the company said its request will be delayed, although only temporarily. A new request will be made soon, said Chrysler Vice President Wendell Larsen.
The delay could indicate that administration officials aren't convinced that Chrysler is still on the path to recovery, even with the latest steps to cut costs and boost sales through an improved rebate program. Miller and other government officials are avoiding anwering that question now, while they weigh Chrysler's current financial condition.
The Treasury Secretary indicated he wants to study Chrysler Chairman Lee A. Iacocca's latest plan for cutting costs and increasing sales. "If he achieves all the things that he's looking at, I think that would certainly be encouraging," Miller told reporters.
By law, Miller and the loan board cannot approve additional help for Chrysler unless they are satisfied the company can solve its problems and become profitable by no later than 1983.
When the last loan installment was approved in July, Iacocca still was predicting a profitable fourth quarter for the company. Iacocca now concedes Chrysler will show a loss for the final three months of 1980, and some industry experts believe it will approach $90 million. Chrysler lost nearly $1.5 billion in the first nine months of this year.
Chrysler's financial problems have been "overstated in the degree of severity," Larsen told reporters yesterday. "We've always been able to maintain [ourselves]."
But with the slow recovery and lagging auto sales, Chrysler is forced to cut back its own programs further to conserve cash, raising new problems for its future recovery. Chrysler recently had to halt production temporarily of its subcompact Dodge Omni and Plymouth Horizon models at its Belvidere, Ill. plant -- and these are two of the cars the company has counted on to lead its recovery.
It also has altered production runs to increase the number of new K cars with fewer extras and thus lower sticker prices. The initial K-car production run had featured cars loaded with options, pushing prices well above $7,000 and the company ran into consumer resistance at those prices, Treasury officials believe.
Now, Chrysler has had to turn to a novel rebate program to boost sales. Announced last week, the program attempts to offset the impact of the surge in interest rates on car buyers by giving them a percentage cut on the sticker prices of Chrysler products equal to the difference between 12 1/2 percent and the prime rate.
[Meanwhile Reuter reported that on Friday participating Ford Motor Co. dealers stated paying interest costs above 12 percent on loans that finance purchases of Mustang, Capri, Granada, Thunderbird, Couger and XR-7 models].