Business: Chrysler Goes Back to the Well

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> Chrysler itself will cut operating expenditures by reducing its white-collar payroll by another 2,200 people, to 21,800. The company will also scrap plans to enlarge its front-wheel-drive production capacity for 1984. Iacocca said that these measures alone would cut costs next year by $575 million.

The goal of the plan, which will reduce Chrysler's overhead by nearly $700 million and increase its assets by $1 billion, is to convince the Government's Loan Guarantee Board that the company is worth the risk of extending another $400 million in loans. The firm has already received $800 million in Government-backed loans.

The initial reaction of Chrysler's partners was one of shock. The U.A.W. had thought that the $462.5 million in wage and benefit cuts it agreed to last winter was supposed to be sufficient. Said one union official: "We bought $1.5 billion in guaranteed loans with our first concessions, not just $800 million." The banks are unhappy about exchanging a loan, which would have at least theoretical value in a bankruptcy proceeding, for stock that would be worthless in case the company fails.

Chrysler's 20,000 suppliers are the most complicated problem. One steel company told Iacocca, in his words, to "drop dead." Said the president of another longtime supplier: "A lot of us will not go along. There is not 5% of profit for us left in Chrysler business."

Chrysler's requests for help may lead to similar calls from other automakers. Ford is now considering asking the auto workers' union for its own wage reductions. Ford has already lost about $1.2 billion this year, and it would like to renegotiate wages to keep its costs and final sales prices competitive.

One reason Iacocca decided to take the gamble of going once more to the well at this time was that he was uncertain about the possibility of getting additional assistance after Jan. 20, when the Reagan Administration takes power in Washington. Reagan opposed the original Chrysler bailout package, and after Inauguration Day his aides will sit on the board that will determine federal aid. G. William Miller, the outgoing Treasury Secretary, last week held meetings of the Loan Guarantee Board and said he thinks it is "in the national interest" to keep Chrysler alive. The board was expected to consider the company's aid request officially this week.

Even if the plan is accepted by all the parties involved, the ultimate survival of Chrysler will depend on selling the slow-moving K-cars in a recession-battered market. Without an upturn in car sales, no special deal will be able to keep the nation's 17th largest out of bankruptcy court.

—By Alexander Taylor Reported by Gisela Bolte/ Washington and Barrett Seaman/Detroit