Sent reeling by intense competition from Japanese manufacturers and a sharp downturn in overall market demand, Hyster Co., the 54-year-old industrial truck maker, took a sober look at its sales charts (down 60% over the last three years, to $422 million in fiscal 1982) and decided to play some hardball of its own. Eschewing niceties, company officials sent out letters to five states (and four foreign countries) where Hyster plants were targeted for cutbacks, layoffs, or closings. The message: Underwrite us or kiss us good-bye.

This blunt warning touched off a round of subsidy roulette that showed the strained posture of local economies in heavily industrialized states. Illinois, nervous about losing Hyster's facility in Danville, where unemployment has already been running over 15%, coughed up $10 million in grants and subsidies. Alabama and Kentucky lent support in the form of block grants and low-interest loans. Oregon, ironically enough the home state of this Portland-based company, became the bloodiest casualty in the game. Seeking equity for its investment, the state proposed anteing up $10 million from its employee pension fund to purchase Hyster stock. The company called the offer "not meaningful," and unsentimentally said it would phase out its plant there.

Most of the money going to Hyster -- excluding sums like the approximately $20 million ponied up by the United Kingdom to protect its Scotland facility -- are federal dollars made available through an urban development grant. This money makes up considerable hunks of the dollars states can use for economic development, and Hyster's bald soliciting of those funds raises tough policy questions, public and private. Unanswered, for instance, is how much of the company's falling market share is due to foreign trade restrictions and subsidies and how much is managerial misjudgment. Other question are how far a city or state can bend to make concessions before it starts ransoming away its economic future, and to what extent do such auctions disguise existing plans for closing marginal operations anyway.

The danger of holding a gun to the head of a company town is that town officials won't always think clearly about long-term needs. Unemployment, after all, is a messy and immediate problem. As pressure mounts to the state level, so does the anxiety about being saddled with the onus of having lost existing jobs -- even if those jobs are doomed down the line anyway.

For now, Hyster hopes for a Chrysler-like comeback. The states witb the open hands have to hope that there aren't more bullets in the barrel than they thought.