Chrysler seeks help from Greenspan to save loan package

August 14, 1992|By New York Times News Service

DETROIT -- A small number of banks from a 152-member worldwide consortium that lend to Chrysler Corp. are refusing to renew their loans, threatening a new $6.8 billion loan package that the automaker says is crucial to its revitalization -- so crucial that it has asked Federal Reserve Chairman Board Alan Greenspan to intervene on its behalf.

The importance of the loan package to Chrysler's future and the danger posed by the reluctance of the banks were underscored last week when the automaker asked Mr. Greenspan to intercede with officials of the Bundesbank, Germany's central bank.

A spokesman for the Fed, however, declined to confirm whether Mr. Greenspan had done so, or even whether anyone from Chrysler had asked him to do so.

Chrysler officials who insisted on anonymity said the automaker sought the Fed's influence with German central bankers to persuade a specific German bank, which they declined to identify, to continue its participation in the consortium.

"This is the most critically important issue facing Chrysler at this moment, so the agreement had better get done," said Maryann Keller, automotive analyst for Furman Selz Inc. in New York.

She said Chrysler's operations were already handicapped, and would be handicapped further if the automaker could not borrow enough to finance vehicle leasing, sales to daily rental fleets and purchases of its vehicles.

Because of regulatory pressure to increase capital and losses from bad real estate loans, banks have been very selective about renewing credit lines to many long-standing corporate and individual customers, even those who represent minimal risk.

Although Chrysler's finances have been shaky the past two years, the automaker's long-term prospects have improved dramatically with the recent introduction of several acclaimed vehicle models, including the Jeep Grand Cherokee. Early in the year, several lenders were concerned that Chrysler had no successor to Lee A. Iacocca, the company's 67-year-old chairman.

That issue was solved in March with the recruitment of Robert J. Eaton from General Motors Corp. But it flared briefly again this week when Kirk Kerkorian, the biggest individual stockholder in Chrysler with a 9.9 percent stake, complained about Mr. Iacocca's diminished role in retirement. Mr. Kerkorian withdrew his complaint, and his request for a seat on the Chrysler board, yesterday after meeting with Mr. Iacocca, Mr. Eaton and and Malcolm Stamper, retired vice chairman of Boeing Co. and chairman of Chrysler's nominating committee.

Following an hourlong meeting in Mr. Kerkorian's office in Beverly Hills, Calif., with the three men, the billionaire investor issued a statement saying he was "convinced that the interests of the Chrysler's shareholders were being well represented by the current board."

If the current banking agreement, which is with the automaker's Chrysler Financial Corp. subsidiary and which stipulates unanimous agreement among all the lenders, is not concluded, Chrysler could be forced to start new negotiations with every bank in the consortium. That could lead to more defections, since several had wanted to withdraw but agreed to remain only if every other bank stayed.

Because of a weak balance sheet and poor credit ratings, Chrysler cannot borrow in public credit markets, except at exorbitant rates.

Jerome B. York, Chrysler's chief financial officer, has been working since May with the automaker's two lead banks, Chemical Bank and Swiss Bank Corp., to win assent from all 152 lenders.

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