A Pistol at Wilson's Head

"The government has been presented with a pistol at its head," Prime Minister Harold Wilson reported to the British House of Commons. He had just been told by John Riccardo, chairman of Chrysler Corp., that if Chrysler United Kingdom Ltd. does not get massive aid --perhaps $210 million--from Wilson's government, it would pull out of Britain, adding tens of thousands to British unemployment rolls that already total 1 million.

Riccardo's ultimatum was an act of corporate chutzpah: Wilson's Labor government is responsible for Chrysler's troubles only in the sense that it has been unable to prevent the inflation and recession that have added to the company's woes. Chrysler also has many troubles of its own. Since it came to Britain in 1964, it has introduced only one genuinely new car, the rather ordinary five-passenger Avenger sedan; its two other models--the Volkswagen-like Imp and the Hunter--were developed by Rootes Motors Ltd., the company that Chrysler bought. Accordingly, Chrysler's share of the British auto market has dropped from a high of 12% in 1967 to less than 7% this year. Since January, Chrysler has laid off 4,000 employees and put the remaining 25,000 on a work week of three days or less. The cutbacks have worsened the company's already bad labor relations: during 1974 strikes cost Chrysler U.K. 2 million man-hours of work. The company lost $37 million last year, and another $34 million in the first half of 1975; those losses contributed to a worldwide Chrysler deficit of $232 million during the first nine months of this year. Even in Argentina, where Chrysler's subsidiary has been doing relatively well, the company put forth a plan last week to sell 60% of its operation to local citizens over the next five years. Economic and political conditions have been worrisome, and the company hopes a new infusion of capital will double production.

Riccardo's ultimatum has now presented Wilson with what one government official calls "an agonizing dilemma." A Chrysler pullout would wipe out not only 25,000 jobs in the company's own plants but perhaps 60,000 more in related industries. Workers are threatening to take over the plants if Chrysler goes home. A shutdown of the 7,000-worker factory in Lin wood, Scotland, might fan the flames of Scottish nationalism. And the Shah of Iran has ordered 126,000 Hunters in kit form; Wilson is not eager to anger one of Britain's principal suppliers of oil by letting Chrysler close without filling the order.

But acceding to Chrysler's demands poses severe problems too. The government is trumpeting a vague new policy of aiding companies in 30 as yet unselected "key sectors of industry" that are efficient and have prospects for rapid growth. Chrysler scarcely qualifies, and Wilson is loath to make a mockery of his new strategy before it even begins. Early this year the government took over the ailing British Leyland Ltd.; by helping Chrysler now it would be competing with itself and, government officials fear, subsidizing overcapacity in the auto industry. The government has lately refused to aid some home-grown industries, notably the motorcycle business; bailing out the British subsidiary of a U.S.-based company would raise a storm of nationalistic objection.

Riccardo is expected back in London this week to hear the government's decision. The betting is that Master Compromiser Wilson will find some solution--perhaps lending Chrysler a fraction of the money it wants so that it can salvage healthy parts of its business or try to bring out a new model. Even that would set an uncomfortable precedent.

A high-ranking manager of General Motors, whose Vauxhall subsidiary is faring only a shade better than Chrysler U.K., already is asking how his company can compete if Chrysler gets government money at, say, 2% interest.

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