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Chrysler expected to replay government loans next week

Marketplace Staff May 19, 2011

Chrysler expected to replay government loans next week

Marketplace Staff May 19, 2011

STEVE CHIOTAKIS: Chrysler today will reportedly announce it’s gotten enough private financing to pay back Uncle Sam. The automaker took billions of dollars in loans from the U.S. and Canadian governments at the height of the financial crisis.

Those loans, coupled with investments from Italian carmaker Fiat, helped Chrysler out of bankruptcy. And payback could set the stage for an even bigger Fiat role going forward.

Alisa Priddle reports on the auto industry for the Detroit News. She’s with us now from the Motor City. Good morning.

ALISA PRIDDLE: Good morning.

CHIOTAKIS: So how is Chrysler planning to pay these government loans back?

PRIDDLE: They’re swapping government loans for bank loans, but the crucial part of that is that there was very high interest on the government loans, and they are refinancing with financial institutions that will give them better rates. And they said all of last year that the only reason they didn’t have a net profit was the interest on their loans. So this is a really big deal.

CHIOTAKIS: Is private money going to have anything to do with this?

PRIDDLE: I mean, it’s going to be hedge funds, banks, that kind of thing. And they’re also getting a big chunk of money from their partner Fiat. Because Fiat wants to buy a bigger stake in Chrysler, so they’ll give them about $1.3 billion for that as well.

CHIOTAKIS: Fiat gets a bigger stake and it’s well know, and Fiat’s made it well know, that they want a majority stake in Chrysler, right?

PRIDDLE: Exactly, and they should have their 51 percent by the end of this year.

CHIOTAKIS: Besides a majority stake, what else could Fiat get out of all this?

PRIDDLE: For Fiat, they are returning to the U.S. market. So Chrysler is the perfect platform that allows them to do that. Fiat’s a small car specialist, so they also get minivans and pick ups and all the people they don’t have. And conversely, Chrysler gets entry into Europe and into South America and gets small cars and small engines. So they’re a very nice fit.

CHIOTAKIS: What does it mean for Chrysler to be off of government support?

PRIDDLE: I think that it’s a psychological thing as much as anything. There’s a lot of people out there who have not wanted to buy vehicles from Chrysler or GM because of the big bailout. So I really think that it’s just how people perceive the company as much as anything.

CHIOTAKIS: Alisa Priddle with the Detroit News. Alisa thanks.

PRIDDLE: Thank you.

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