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.
Marketplace’s Mitchell Hartman reports the loan payback could set the stage for Fiat to take a bigger role in the company.
MITCHELL HARTMAN: Executives from Chrysler and Fiat have been on a dog-and-pony show — maybe we should call it a ‘Jeep-and-Alfa Romeo’ show — for investors nationwide, hyping the company’s new car designs and optimistic business plans. It seems to have paid off. Chrysler’s reportedly raised $7.5 billion in new loans and bonds to retire its remaining debts to the U.S. and Canadian treasuries.
Those loans had interest rates as high as 20 percent. Paying them off is a lift to the bottom line. It’s also good PR, says Coventry University business professor David Bailey.
DAVID BAILEY: A government-owned company may not have gone down particularly well among some in the U.S. market and they want to get out from under government control and reestablish themselves as a private company.
By year’s end, Fiat will own a majority stake in Chrysler. They’ll work on revamping Chrysler’s truck-heavy product line — bringing in more European technology; and introducing more small, fuel-efficient vehicles.
I’m Mitchell Hartman for Marketplace.
JEREMY HOBSON: Chrysler is expected to announce today that it has found the private financing it needs to pay back $6 billion in U.S. government loans. The smallest of the big-three U.S. automakers has been riding in Uncle Sam’s sidecar ever since emerging from bankruptcy in 2009.
Marketplace’s Mitchell Hartman joins us live with more on this story. Good morning.
MITCHELL HARTMAN: Good morning.
HOBSON: Well how significant is this for Chrysler?
HARTMAN: That $6 billion in U.S. government loans that you mentioned as well as a smaller amount from Canada — it’s a real pain for Chrysler. They pay interest as high as 20 percent. So by borrowing from banks and then also selling bonds, Chrysler will lower its debt costs and repay the government early actually. This clears the way for Fiat to increase its stake in Chrysler. Right now the United Autoworkers — about 50,000 Chrysler words — is the biggest shareholder. By year’s end, that’ll be Fiat.
HOBSON: And Mitchell, what do we know at this point about Fiat’s plans for Chrysler?
HARTMAN: Fiat’s already been helping Chrysler to streamline — putting old legacy brands out to pasture and bringing in new designs. Now it’ll also be lifting the stigma of “bailed-out automaker.”
David Bailey is a business professor at Coventry University and he says Fiat’s investment is key to Chrysler’s survival.
DAVID BAILEY: They need new technology, especially in terms of producing smaller cars with smaller engines which are more fuel-efficient. Around the world, governments are setting targets for better fuel efficiency. Chrysler needs help to do that and Fiat can bring it.
And that’s crucial for Chrysler to compete in exports to developing markets in Asia and Latin America. Which is where a lot of the sales growth for all of the U.S. automakers is expected going forward.
HOBSON: Marketplace’s Mitchell Hartman, thanks.
HARTMAN: You’re welcome.
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