$1 a Year?

Chrysler: pay down, orders up

Buoyed by price rebates that appear to be boosting car sales, Chrysler Corp. chiefs are expected this week to give Treasury Secretary G. William Miller their promised plan of sacrifice and salesmanship for the company's survival. As a gesture to a Government from which they are requesting aid and a union from which they want concessions, Chrysler's two top executives announced last week that they are becoming $1-a-year men.

Chairman John Riccardo and President Lee lacocca temporarily waived their annual salaries of $360,000 in exchange for cash or credits tied to the value of Chrysler stock. If two years from now the stock price is unchanged from the August closing average of around $8, each executive will get back all his deferred pay; if the stock doubles, each will receive double, and if it halves, each will get only half. Meanwhile, the company also announced salary reductions of up to 10% for about 1,700 executives.

Chrysler is expected to lose perhaps $700 million this year after a deficit of $204.6 million last year. United Auto Workers leaders, who earlier rejected lacocca's plea for a two-year wage freeze, now concede that they will have to make considerable concessions to Chrysler.* Fortunately, the company's rebate program seems to be off to a strong start.

It is hard to turn on a television set or radio without hearing Joe Garagiola, the baseball catcher turned pitchman, importuning customers to come in and collect $400 price rebates on all Chrysler models except for the most popular small cars like the Omni and Horizon. The company's advertising agency, Kenyon & Eckhardt, and some 25 other suppliers and service agents are giving additional rebates of $100 to $500 to any of their employees who buy Chryslers. In addition, Chrysler since May has been granting its dealers special discounts that now range from $325 to $1,500 per auto. These cuts have pared Chrysler's factory stockpiles from 80,000 cars two months ago to some 30,000 at last week's end. A Chrysler survey of 181 of its 4,700 dealers showed that the average selling rate in the second two weeks of August was 70% above the first half of the month and more than double the July pace.

The hard selling could soften future markets. The company will launch its 1980 models on Oct. 12, and there is always the danger that the drummed-up demand now could take away from sales of the new cars. Also, the discounts being offered to buyers and dealers are so large that profit margins on each sale are small.

Business leaders in other fields cheer Chrysler's off-the-mat selling drive, but many oppose federal aid. True, a number agree with Zenith Chairman John Nevin, who argues, "I don't think you can casually stand aside and watch a company the size of Chrysler go down. You have to calculate the cost of Chrysler going under and ask if it is worth something to prevent that." But many more echo Clarence Barksdale, chairman of the First National Bank in St. Louis: "If you have any belief in the free-enterprise system, you have to let weak companies like Chrysler sink."

David Jones, chairman of Humana Inc., complains that Chrysler's previous management made bad decisions, "and now they expect somebody else to pick up the bill." Pertec Computer Chairman Ryal Poppa warns, "Soon the Government will be asking us why we complain when they want to regulate our businesses if we're so willing to accept their help when we are in trouble." Economist Alan Greenspan finds a Government bailout wrong on principle, wrong because it would be granted not to any troubled company but only to a large one, and wrong because it would not protect jobs. Says he: "All it would do would be to freeze people into jobs without a future."

Yet when Congress debates the case for federal aid, legislators are likely to listen less to business skeptics than to the auto union, Chrysler suppliers and politicians from states in which the company has operations. Many have been lobbying hard for Chrysler. Whatever the economic merits or demerits of aid, the decision probably will be made on grounds of saving jobs and winning votes in 1980. sb

*The UAW last week picked General Motors as its "target" for a strike if an industry contract is not reached by the Sept. 14 deadline. Unlike the four confrontations, all of which ended in strikes, the prebargaining negotiations remained uncharacteristically restrained and calm, and prospects for a no-strike settlement seem reasonable.

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