GOVERNMENT: More Cash for Kaiser

After lending Henry Kaiser $34.4 million only a month ago, the RFC last week opened its cash drawer and plunked out another $10 million to its great & good friend. The earlier loan was to help Kaiser-Frazer bring out a low-priced car by next spring to compete with Ford, Chevrolet and Plymouth. The second loan was to permit K-F to finance its dealers’ purchases of cars from the factory, because K-F dealers had trouble getting loans from private banks. All told, RFC has loaned K-F almost as much as the company raised in stock sales.

When the new $44.4 million credit is drawn on, Henry Kaiser’s various enterprises, according to his books, will owe the Government $186.6 million. He still owes $88.2 million on his Fontana, Calif, steel plant and $54 million on Permanente Metals, Willow Run and the Ironton (Utah) blast furnace. To date, Kaiser has paid off a total of $70.1 million on Government loans and credits, and he has paid another $41 million to the U.S. in rents and interest. Kaiser said he has also poured $108 million in earnings and private loans into improving and expanding his plants.

Despite the whopping Kaiser debts to the U.S., RFC Chairman Harley Hise, a onetime California banker and minor Democratic politician, regarded the $44.4 million loans as “sound banking” action. Hise thought that there was “more than a reasonable chance that K-F can succeed.”

Actually the terms to Kaiser are fairly stiff. For the $44.4 million, RFC required 1) a lien on all physical assets of K-F, 2) a guaranty for $15 million of the loan by two other Kaiser companies “who must also put up stock collateral having a market value of at least $10 million, and 3) a lien for $10 million of the loan on a fixed reserve of unsold autos.

RFC was influenced, explained Harley Hise, by the dire alternatives for K-F if the money had been refused. Said he: K-F might have had to shut down, resulting in heavy unemployment. As it was, K-F last week had to lay off 5,000 workers anyway, while it tried to sell cars on hand. But Hise hoped that that was just a temporary situation and that “the loans will be repaid from earnings.”