I sent your question to an engineer at Saginaw. Here is his answer:
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Jim,
Obviously the VATS (properly known as Pass Key) wires are affected. He says they're disconnected under the dash. ( My suspicion is that this vehicle was once stolen, since thieves try various resistor values at the electrical connector until they find the correct one, because they don't have the proper key.) I would also check continuity in the column from the lock cylinder to the connector, because those 125 strand wires may be fatigued. VATS was introduced in '88, and inhibits both the fuel flow and the starter. The resistor in the ignition key needs to be matched with the value stored in the vehicle. I recall that there were 14 different values, but only 12 were used in production. He probably will need a dealership diagnostic kit to find the proper resistor and have it mounted to the key. The VATS system has to be connected in order to start the vehicle.
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Since this is the anti-theft system, it sounds as if you are going to have to involve a dealer in the solution. It is probably not going to be a cheap fix.
JIML82