Chrysler Financial Facing Higher Borrowing Costs
With the "energy crisis" as the calamity of the moment, it's easy to forget that the credit crunch is still a long ways from resolution. Luckily, Chrysler is around to remind us. The Wall Street Journal reports ChryCo Financial has a $30b credit facility due for renewal next month, with its borrowing rates set to rise. The usual unnamed sources say the renewal deal is still being "worked out." And while the exact increases are not yet known, analysts are placing the spread at more than one point over LIBOR, currently 2.8 percent. JPMorganChase is said to be "pushing hard to persuade more than 20 banks to renew the facility — backed by car loans, leases and loans to dealers — that was issued by the auto-finance company last year when it was carved-out of the former DaimlerChrysler AG." Uh-oh. Investors have been running away from this exact sort of complex, structured debt since the credit crunch first hit. In contrast, Ford and GM typically use such "conduits" in one or two-month increments, keeping their borrowing costs below 0.5 percent above LIBOR. And the more expensive the borrowing, the less Chrysler can offer in financing terms to move its metal. Which is barely moving anyway. Not good.
Given the weakness in CFC's current loan portfolio, it's certainly not the best time to be trying to renegotiate credit facilities. However, trouble at CFC is not necessarily the same as trouble at CLLC....despite some of the worst public relation skills ever seen in corporate America, CLLC is probably on far firmer ground than many on this site are presuming.
People pay money for Dodges? I just assumed they were make work projects for underskilled overpaid union day laborers; you know Home Depot for Michigan and Ohio. And Let the Flaming Commence!
@Geotpf: Fair and good points. However, CLLC has sufficient access to capital beyond what has been reported to weather these issues as they transform the business model to more of a contract manufacturing/outsourcing model than their larger competitors. What CLLC lacks in scale it has the potential to balance in terms of speed of action. The owners have already made it patently clear that they lack the sentimental ties to Detroit and even the US that moderate the actions of Ford and GM. GMAC/CFC may well turn out to be poor investments; IMO, it's far too early to write off CLLC.