Battle of Britain

CRUCIFIED BY CHRYSLER, wailed one London headline. SCORCHED BY THE FLAMETHROWER, complained another. The object of this pained outrage was a stunning victory won by the Chrysler Corp. and its chairman, John Riccardo, in a high-stakes struggle that promises to have a deep impact on the future of both Chrysler and Britain's Labor government.

Early last November Riccardo presented Britain's Prime Minister Harold Wilson with a prickly problem. Unless the British government agreed to provide massive aid for Chrysler's troubled British subsidiary, Riccardo said, the company would be forced to shut down its five major plants in Britain and cashier its 25,000 employees there. For a while it seemed that Riccardo, whose sometimes brusque manner long ago earned him the nickname "the Flamethrower," would have to do just that. Wilson denounced the Riccardo ultimatum, angrily protesting that Chrysler had left the government "with a pistol at its head." But last week in a startling, if characteristically Wilsonian, about-face, the Prime Minister agreed to help out Chrysler after all.

Heavy Losses. The Labor plan, which was grudgingly approved by a sharply divided House of Commons, would provide up to $325 million in grants, loans and guarantees to keep Chrysler U.K. Ltd. in operation for another four years. Wilson's politically explosive decision severely weakened the credibility of his government's new economic policy, unveiled only last month, which calls for helping potentially successful companies rather than weak concerns like Chrysler U.K.

The future of Chrysler's troubled British subsidiary had long concerned both company officials in the U.S. and the Wilson government. Riccardo, who succeeded Lynn Townsend as Chrysler's chairman last October after the company reported heavy losses, was determined to solve the British "problem." Chrysler U.K. has lost $117 million over the past decade and was a record $36 million in the red by mid-1975. Among other things, the company has been hurt by indifferent management, continuing strikes and a lackluster model line.

Labor Seats. The British had their own doubts about Chrysler U.K.'s prospects. Just before the Wilson government announced its Chrysler rescue plan, it also released a study that concluded there were "too many" auto manufacturers in Britain. The weakest was clearly Chrysler, which holds barely 6% of the British car market.

Why did Wilson decide to aid Chrysler after all? Politics appeared to be the deciding factor. A Chrysler shutdown would have added to unemployment at a time when the British jobless rate already stands above the politically sensitive 1 million mark. Apparently equally important to Wilson was the possibility that a layoff of the 7,000 employees at the Chrysler plant in Linwood, Scotland, would give a potent political issue to Scottish nationalists and thus endanger several Labor seats that Wilson needs to maintain his slim majority in Commons.

The Wilson plan calls for the government to compensate Chrysler U.K. for losses of up to $100 million in 1976 and $45 million of any additional deficits through 1979. This aid will not be repaid, but the government gets to take half of any profit the subsidiary might make in the next four years. In addition, the government agreed to lend Chrysler $110 million to help the company develop new car models and guaranteed $70 million in loans from British commercial banks. In exchange, Chrysler will, among other things, turn out five new models, beginning with a revamped version of its Avenger sedan that will appear next summer.

Yet Chrysler's ultimate survival in Britain is far from assured. Asked recently whether the British subsidiary is the biggest of Chrysler's problems, Riccardo said, "I think we'd have to say of course it is." While the Wilson aid plan helps, Chrysler U.K.'s basic problems remain to be solved.

This file is automatically generated by a robot program, so viewer discretion is required.