The government's Chrysler loan board met yesterday to begin a crucial review of Chrysler's new plan to freeze workers' wages and cut other costs next year to qualify for up to $400 million more in federally guaranteed loans.
Treasury Secretary G. William Miller was quoted over the weekend as saying he was "very optimistic" that Chrysler's $1.5 billion in planned cost reductions would be enough to keep the government-backed loan funds flowing to the stricken auto company.
Rep. William Brodhead (D-Mich.) said he talked to Miller, head of the loan guarantee board, on Friday and found the Treasury secretary optimistic that new loan guarantees will be approved soon. Chrysler has not yet said how much new aid it will seek.
"He felt it would work," said Brodhead.The new loan guarantees can keep Chrysler going for the next several months, in Miller's view, said Brodhead. "Beyond that, it's going to take a change in the auto markets and interest rates coming down to get Chrysler going again," he said.
Chrysler's immediate hurdle, however, is not the loan board but the 109,000 UAW Chrysler workers in the United States, its 20,000 suppliers and 100 major creditor banks, who are being asked to approve the reported $1.5 billion cost-reduction package.
UAW officials are to meet tonight with Chrysler representatives to hear the details of the company's wage concession plan. There could be opposition from the union rank and file, which already has agreed to forego $460 million in pay and benefit increases during the current three-year contract period which began last year.
The average Chrysler worker will be receiving about $5,000 less than UAW workers at other auto companies over the three years, the union estimates.
Chrysler Vice President Wendell Larsen said banking officials who met with the company representatives Friday were "fairly positive" about Chrysler's new plan. Although Larsen wouldn't disclose the details, Chrysler reportedly has asked banks to exchange some $500 million in outstanding debt for shares of Chrysler stock.
David Healy, an auto industry analyst with Drexel Burnham Lambert, said that many of the banks already have written off their Chrysler notes and thus may accept the company's proposal.
Chrysler would like to put its new plan before Miller and the other members of the loan board this week or next.