July 22, 2024

Chrysler Pays Back Loans From the U.S. and Canada

Chrysler said it made payments of $5.9 billion to the United States Treasury and $1.7 billion to Export Development Canada in a series of transactions completed Tuesday morning. The payments retired outstanding loans and covered interest on the debt.

Chrysler’s chief executive, Sergio Marchionne, planned to formally announce the move at a ceremony Tuesday afternoon at an assembly plant in Sterling Heights, Mich.

He was scheduled to be joined by Ron Bloom and Brian Deese, two members of the auto task force that was assembled by President Obama to shepherd Chrysler and General Motors through bankruptcy reorganization in 2009 with the aid of the United States taxpayers.

“The loans gave us a rare second chance to demonstrate what the people of this company can deliver,” Mr. Marchionne said. “We owe a debt of gratitude to those whose intervention allowed Chrysler Group to re-establish itself as a strong and viable carmaker.”

Chrysler had been struggling with high interest costs on the debt, which prevented it from reporting a profit until the first quarter of this year. The company said it recently reached agreement on new financing from a consortium of investment banks that includes a term loan of $3 billion, debt securities totaling $3.2 billion, and a revolving credit facility of $1.3 billion.

The new financing package allowed Chrysler to shed the government loans, which did not mature until 2017 but were hurting the company’s image in the marketplace.

Chrysler estimated that the new financing would save the company $350 million a year in interest expenses.

Treasury Secretary Timothy F. Geithner hailed the repayment as further proof of the effectiveness of the Obama administration’s efforts to bail out the struggling American auto industry.

“Because President Obama made the tough decision to stand behind and restructure the auto industry, America’s automakers are growing stronger, making new investments, and creating new jobs today throughout our nation’s industrial heartland.” Mr. Geithner said in a statement.

The loan repayment was made possible partly by funds from Chrysler’s Italian partner, Fiat.

Fiat paid Chrysler $1.3 billion to increase its stake in the Detroit automaker to 46 percent from 30 percent. Some of that cash was then used to reimburse the United States government.

Many auto analysts considered Chrysler a long shot to recover after it emerged from bankruptcy. Its truck-heavy product lineup was out of step with more fuel-conscious consumers, and it had few new models to attract buyers to its showrooms.

But with the aid of Fiat, which is also headed by Mr. Marchionne, Chrysler is re-emerging as a healthy competitor in the United States market.

Chrysler’s sales rose 22.5 percent through the first four months of the year, compared to a 19.6-percent increase for the overall U.S. market. The company’s new Jeep Grand Cherokee SUV and Chrysler 300 sedan are leading the comeback.

Earlier this month, Chrysler announced that it had earned $116 million in the first quarter of this year — its first quarterly profit since 2006. Mr. Marchionne predicted better times ahead as Chrysler continues to introduce new vehicles. “There is more work to be done,” he said.

Article source: http://feeds.nytimes.com/click.phdo?i=66882bb6bbf404057871881dc9cd6584

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