Chrysler Seeks Government Loan Re-Fi

Edward Niedermeyer
by Edward Niedermeyer
chrysler seeks government loan re fi

With about $7.84b of cash on-hand and $7.4b in debt to the US and Canadian governments, Chrysler wants to take a page out of GM’s IPO playbook and secure a Wall Street refinance of its government debt, which bears interest of between 14 and 20 percent. CEO Sergio Marchionne had already complained that servicing its government debt prevented Chrysler from achieving profitability in the second quarter. According to Automotive News [sub] Chryler is shopping banks as it seeks loans at newly-low interest rates in order to shore up its balance book ahead of an IPO sometime next year. Chrysler needs $3b of cash on-hand for its operating and debt servicing costs, so a failure to secure new funding could cause its cash levels to dip to dangerous levels. GM has said that its recently-acquired $5b revolving credit line would not be tapped right away, but would provide a liquidity cushion of the kind that Chrysler arguably needs even more than The General. On the other hand, it’s easier to borrow money when you have money, and GM is sitting on considerably more cash than Chrysler. Meanwhile, Fiat has yet to inject a single Euro of cash into Chrysler. Maybe this is Marchionne’s chance to put some real skin in his Chrysler play.

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  • Robert.Walter Robert.Walter on Oct 30, 2010

    "Maybe this is Marchionne’s chance to put some real skin in his Chrysler play." Likely not, unless no other option remains, S.M. is unlikely to do that. (Although just a modest contribution would do wonders for Public Relations.)

  • HerrKaLeun HerrKaLeun on Oct 30, 2010
    CEO Sergio Marchionne had already complained that servicing its government debt prevented Chrysler from achieving profitability in the second quarter. Huh? they were not forced to take the loan, they basically forced us (by lobbying and bribing etc...) to give them the loan! Yes, the mean government gives an nonviable business a loan (and a brokered bankruptcy deal) when no sane person would have lent them money. I gladly take that bad loan back any time if they don't want to pay interest anymore. no matte what you give them, they still complain. the government gave them the Toyota UA scandal, almost free car financing, purchases many of their products.... but still not enough.

    • Robert.Walter Robert.Walter on Oct 30, 2010

      " the government Toyota gave them the Toyota UA scandal". There, fixed it for you. Toyota gave themselves their own scandal, the flames of which were fanned from many directions once their problems, aided by their own lethargic response, found their way into the public consciousness and crossed the barrier into the political world...

  • Lorenzo Lorenzo on Oct 30, 2010

    HerrKaLeun, you are in error. Chrysler didn't FORCE anybody into anything. Our government dictated ALL the terms of Chrysler's bankruptcy, including the loan. The pre-bankruptcy owner Cerberus was anxious to be rid of Chrysler before it cost them money, and was willing to write off its modest investment. The banks, like Citi, and bond holders were less anxious but were forced into writeoffs/losses by the government's whiz kids, who did great violence to bankruptcy law in the process. The government then gave operating control to Fiat, and majority ownership to the UAW VEBA trust in lieu of the cash Chrysler owed. In so doing, the government gave Chrysler a reprieve and washed their hands of responsibility for what might happen to the company in the future. There's no way to blame anyone at Chrysler for the bankruptcy terms, since Daimler and Cerberus had aleady stripped it down to a shell of what it had been a decade before. The book has yet to be written, that details the systematic destruction of a successful, very profitable company in only eleven years, by German and Wall Street strip and flip artists. When that book is written, I hope it names names, but it won't be names of managers who ran Chrysler who quit when they saw what the owners were doing, or were fired/laid off.

    • See 2 previous
    • LXbuilder LXbuilder on Oct 31, 2010

      Well said, I get so tired of all the "expert" commentary left in auto site comment sections by clowns that have no clue what so ever of what really goes on in the industry. Its really amazing to me how the blame for failure ALWAYS lands on the "little guy". Designers, Engineers, Labour as the "big guys" that make all the f'ed up decisions just slip away with the money and very little negative attention. And hey how many times did I read bitching about "bailouts" and "gee I wish the Government would give me a bailout". Any of those folks still want a bail out like Chrysler got, I'll give it to you and I'll only charge you the 14% not the 20%. Can't beat a deal like that.

  • Jimboy Jimboy on Oct 31, 2010

    Your absolutely right, Lorenzo! I'll be the first in line to purchase that book when it comes out. Well said.