The government's loan guarantee baord yesterday approved a new financing plan for Chrysler Corp., sending it on the suppliers, the United Auto Workers, and a group of 150 banks and creditors, all of whom are required to make new financial sacrifices to keep Chrysler in business.
If all these groups approve the financing plan, Chrysler can receive $400 million more in government guaranteed loans after a 15-day waiting period, pfoviding the company with critically needed operating funds.
The UAW yesterday took another step toward accepting its part of the new financing plan, a total of $622 million in wage and benefit concessions between now and September 1982 that would leave the pay of Chrysler union workers about $3 an hour less than UAW members at General Motors Corp. and Ford Motor Co.
The UAW's Chrysler Council -- a 250-member advisory group -- gave its approval to the concessions at a meeting yesterday in Detroit, clearing the way for the company's rank-and-file members to vote on the plan, perhaps on Wednesday.
But Chrysler apparently faces a more difficult job persuading officials of some 150 U.S. and foreign banks to make the financial concessions required of them. Under the plan negotiated last week, the company's bank, and insurance company creditors would have to agree to exchange about $496 million in preferred Chrysler stock in exchange for half of the company's $1 billion debt. They would receive cash for the remaining $504 million, at 30 cents on the dollar.
The arrangement would wipe out Chrysler's $1 billion indebtedness, hopefully making it a more attractive partner in a merger with a foreign auto company, the only solution to its long-term survival, according to Treasury Secretary G. William Miller, chairman of the loan board.
The concessions would make sense to the bank and insurance firm creditors if they believe in Chrysler's ability to survive and return to profitability in the foreseeable future, a Chrysler official said. They would receive $150 million beginning in May to settle half of the debt.
But if creditors conclude that Chrysler can't make it, even with the $400 million, then they are not likely to approve the new plan, explained bank analyst Larry Fuller of the New York investment firm Drexel Burnham Lambert. In guaranteeing the loand to Chrysler, the government has first claim on Chrysler's assets should the company fail. The guarantees approved last year total $800 million, and creditors would be reluctant to add another $400 million in preferred claims against Chrysler assets if they feel the company cannot make it, Fuller and other analysts say.
The company also may have problems ahead with the Canadian government, whose industry minister, Herb Gray, showed signs of balking at Chrysler's new plan to cut capital investment in Canada from a planned $1 billion to $600 million. The reductions in capital spending are a crucial part of the new plan, trimming Chrysler's overall operating costs by some $500 million this year.
But gray noted that Chrysler had promised last May during the first financing crisis to invest the $1 billion in expanding and modernizing its production facilities in Canada.