Chrysler Corp., written off by many as a dying company three years ago, said yesterday it will repay $800 million in remaining federally backed loans by Sept. 30--seven years ahead of schedule.
The new repayment plan, approved by the government's Chrysler Loan Guarantee Board, confirms Chrysler's revival as a major domestic automaker.
"This is our declaration of independence--financial independence," Chrysler Chairman Lee A. Iacocca said here yesterday in making the announcement. "We are about to reestablish Chrysler as a successful private corporation that pays its own way. . . . This is a day that makes the last three miserable years seem all worthwhile."
The No. 3 automaker now has $1.5 billion in cash and securities, largely because of aggressive cost-cutting and the continuing popularity of its product line.
In 1979, however, Chrysler had to borrow $1.2 billion in government-guaranteed loans--a time when no other loans were available to keep the company alive. It repaid $400 million last month, and quick elimination of the full debt saves $56 million a year in interest charges, Chrysler said.
Dumping the debt also frees Chrysler from the supervision of the loan board, giving the company extra mobility to pursue future business opportunities--including a possible joint-production agreement with Volkswagen of America.
Iacocca confirmed that Chrysler has been holding talks with Volkswagen "on where the U.S. auto market is headed." Until recently, Chrysler had purchased VW engines for its subcompacts, and Iacocca added, "I would like to do more than buy engines from them. But I can't define what 'more' would be right now."
"This is not just a Chrysler success story. It's an American success story," said Sen. Donald W. Riegle Jr. (D-Mich.), one of the government officials who joined Iacocca yesterday to mark Chrysler's turnaround.
"Obviously, this Chrysler turnaround is a fantastic one," Treasury Secretary Donald T. Regan said after the Iacocca address.
But Regan said Chrysler's success is not so fantastic that the loan board is willing to surrender warrants that could be worth $259.2 million if used to purchase Chrysler stock at current prices.
The warrants, allowing the government to buy 14.4 million shares of Chrysler stock at $13 a share by 1990, were issued to the government in 1979 as part of the agreement granting Chrysler access to the federally backed loans.
Regan said the board will consider a number of options, including selling the warrants back to Chrysler at a negotiated price. But surrendering the warrants--a request by Chrysler that was withdrawn after an outpouring of public criticism--is "out of the question," Regan said.
Iacocca said he will seek a "fair and reasonable" settlement with the government on the warrants question. He also said Chrysler plans "to sit down . . . shortly" to talk with UAW leaders whose members "want to share in our success."
Chrysler's UAW workers have given back more than $1.068 billion in wages and benefits since 1979 to help save the company and their jobs. Unionized Chrysler employes are paid about $2.12 less in hourly wages than their counterparts at General Motors Corp. and Ford Motor Co., respectively the first and second largest automakers in the United States.
The union's Chrysler bargaining committee is scheduled to meet July 22 to consider reopening its current agreement with the company, which expires Jan. 14, 1984. The meeting will take place one day after Chrysler announces what auto industry analysts say will be a record second-quarter profit of about $290 million.
Chrysler also cut the pay of its white-collar employes--about half, or 20,000 of whom were laid off since 1980--in the company's struggle to regain solvency.
Iacocca said Chrysler will try to make amends to its workers and suppliers, who also sacrificed millions of dollars to help keep the company afloat. He thanked them, but asked that they moderate future demands.
UAW President Owen Bieber said his union is willing to go along with that request. "We don't want to do anything to make the company noncompetitive," he said at an earlier meeting this week in Detroit. Bieber said he does not expect Chrysler UAW members to gain parity with GM and Ford workers before the end of the year.
But those issues temporarily took a back seat to turnaround euphoria. "My inclination is just to stop now and hold a party," said Iacocca, who was given a hero's welcome by many in his huge audience at the Capital Hilton yesterday.