Chrysler's debt to taxpayers
Remember when a $1.2 billion US government loan guarantee was all that prevented an outright financial collapse of the Chrysler Corporation? Well, the loan package proved successful. And so, too, did the new management team at Chrysler, which posted a $170 million profit for 1982 and net income of $172 million for the first quarter of 1983. Chrysler's market share has inched back up - to 12.8 percent - and Chrysler stock has been taking off on Wall Street.
In short, there is quite a different message coming out of Chrysler headquarters than in the dog days when company officials were pleading for federal help. So when Chrysler executives are eager to have the government undo a major part of that original federal loan package - as is now the case - one cannot help but be somewhat dismayed.
At issue is Chrysler's desire that the government forgo its right to make a profit by cashing in warrants to buy 14.4 million shares of the company's stock. Under terms of the original loan guarantee agreement, the government has the right to buy the stock at $13 per share. With Chrysler now trading above $28 a share, the government would make a tidy profit of over $220 million. Given the size of this year's projected federal deficit, that is a timely profit for all taxpayers.
Chrysler argues that if the government exercises those warrants, total shares outstanding would be diluted by around 9 percent. In other words, Chrysler shareholders would see the value of their own stock holdings fall by that much. But the fact is that Chrysler shareholders purchased their holdings with full awareness of the loan package. Thus, Chrysler has no moral justification for backtracking from that agreement now. Chrysler was desperate for a bailout. It got the private loans and the government's financial backing. So why should it not be required to honor that original agreement? And why should the government not make a profit?
The Federal Loan Guarantee Board, which must meet on the issue, should have no hesitation in insisting that the automaker honor its commitment. If the private sector wants government to operate with efficiency and integrity, should it not do the same? A company willingness to say ''thank you'' to American taxpayers would not only enhance its image. It would set a standard for the kind of government-industry cooperation that these new times call for.