Business: Big Loss, Bigger Bailout

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Miller's announcement last week was deliberately timed to follow Chrysler's latest loss report, the better to make the Administration's motives seem purely economic. The Secretary explained that the higher aid package was necessary in part because the company now needed "greater resources than were apparently required in August." Actually, the Administration had known that Chrysler's third-quarter deficit would be huge, and in fact last September the company had forecast an even larger loss.

Chrysler also played politics in its pursuit of aid. The company not only recruited Michigan's congressional delegation, led by Senator Don Riegle and Congressman Jim Blanchard, to press its case on Capitol Hill but also dispatched a team of high-powered lobbyists to work up House and Senate support. Much of the pressuring was concentrated on Wisconsin's Proxmire, who had let it be known that he would be in no great hurry to have his committee report out an aid bill before Christmas. Though Proxmire's opposition to the bailout is genuine enough, by last week he had agreed to a Riegle request that his hearings on the bill be moved forward from Nov. 19 to next week, so that they could be finished before the Thanksgiving recess.

Government help of some sort is plainly needed if banks are to be persuaded to continue to finance Chrysler. Despite five profitable years, the company has run up a net loss in the 1970s of $100 million, and more than half the red ink has come this year alone. So far the 1979 deficit totals $722 million, and the full-year loss could easily top $1 billion, an all-time record for U.S. industry.

Some of Chrysler's deficits result from the high cost of meeting clean air standards and fuel efficiency requirements. But it was the gas shortages of last spring that triggered Chrysler's ruinous 1979 sales slump (indeed, recently Ford and General Motors have also been losing money on their U.S. operations). Yet the fundamental problem has been poor management; Chrysler has consistently failed to come up with enough models that sell well, and its share of the U.S. auto market has slumped from 14% three years ago to 11% now. The firm's total indebtedness, including that of its financial affiliate, now stands at more than $5 billion, spread among some 250 different banks and other institutions, and lenders are wary of taking on any more Chrysler debt.

Yet Chrysler does stand a good chance of raising the $1.5 billion that it needs to get its loan guarantee in other ways. Three likely sources of funds:

> United Auto Workers: $203 million, representing money that the UAW has agreed to forgo in its new three-year contract. Included is a delay in phasing in certain wage and benefit increases that G.M. and Ford workers are already receiving.

> State aid: about $250 million, representing various financial schemes now cooking between Chrysler and the seven states where it has major operations. For example, the state of Michigan plans to mortgage Chrysler's Highland Park headquarters for $150 million.