Chrysler Baiout Only Under Redesign Conditions

“After several days of congressional hearings, the Chrysler bailout situation is becoming clearer. There is widespread agreement (government, labor, new Chrysler executives and others) that the company has been mismanaged. Little credence among decision makers is being given to Chrysler chairman Lee Iacocca’s repeated scapegoating of Uncle Sam–the regulator for much of the failing company’s troubles.

The Department of Transportation issued a detailed report taking apart Iacocca’s contentions in this regard and showing how fuel efficiency standards even helped Chrysler compete with imports. Finally, there is growing recognization in Congress that the Treasury Department’s $1.5 billion loan guarantee, contingent on Chrysler raising another $1.5 billion, will not be enough to save the company as a full-line auto manufacturer.

Yet Chrysler management insists on remaining a full-line company and rejects the recommendation of Sens. Proxmire and Stevenson that it sell off enough of its properties and scale down to a small auto producer.

So senators and representatives increasingly are asking themselves whether Chrysler will be back in two years to ask for more. The more of them who believe this will occur, the greater will be the opposition to the bailout. A greater fear is that other failing corporate giants will follow the Chrysler precedent to the federal trough.

On the other hand, it is an election year. Carter and Congress are seized by the hasty expediencies of the next few months. But the impact of Chrysler’s multimillion-dollar lobbying for a multibillion-dollar bailout from Washington, several states, the United Auto Workers and other stakeholders seems to have peaked. Chrysler dealers, suppliers and creditors are saying Chrysler must be saved, but they want the taxpayers to go first in the salvage operation. This lack of dollar confidence in Chrysler by its economic constituency is worrying some members of Congress. Aid from the states is likely to mean property tax abatement or deferral, which in turn means squeezing school and other municipal budgets.

To make matters worse, Chrysler sales are dropping sharply. Overall auto sales have declined nationally. Growing recession makes next year’s market prospects more grim for Chrysler.

Sen. Adlai Stevenson says the Treasury proposal is designed “to forestall a Chrysler collapse until 1981 instead of facilitating the long-term process of adjustment that could promote economic growth, expand employment and increase real wages. It is thin on constructive ideas. “

But taking a broader view than a temporary Band-Aid approach is not the stuff of congressional imagination. If it were, the Chrysler adversity could be turned into a national opportunity to meet more quickly the declared national goals of energy efficiency, air pollution reduction, safety on the highways and lower damage costs from vehicle crashes.

The suggestion is simple and the details can be worked out expediently. The government would enter into a mission-oriented agreement, as was done in the space program with private companies, to produce trailblazing automobiles which are far safer, more fuel efficient, less damage prone in low-speed collisions and less polluting than other manufacturers’ cars in the ’80s otherwise will be.

How can this be achieved? By putting into mass production the DOT’s model cars. These vehicles not only meet the above descriptions but they are attractive and under 3,000 pounds base weight. One of the private engineering firms which produced a practical prototype (five-passenger sedan) worked with Chrysler engineers on the project. If produced today, these cars could sell for less than $6,000.

A government/Chrysler joint production program would push the rest of the auto companies to higher standards. Along with local, state and federal government annual vehicle procurement of such outstanding cars, the consumer demand would quicken. When the Transportation Department toured the Calspan/Chrysler prototype vehicle around the country, many people would come up and say, “That’s the kind of car Chrysler should have built.”

Congress could advance the need to save gasoline, lives and dollars with such a joint program. Consumers, workers, taxpayers and the general economy all will benefit together. Senators and representatives looking for a constructive way out might consider this more integrated approach to the Chrysler dilemma.