Chrysler exits government bailout 6 years early

May 25, 2011 | 09:27
US automaker Chrysler announced Tuesday it had exited six years early a US and Canadian rescue program with the repayment of billions of dollars provided during the 2008-2009 economic crisis.

Chrysler said it had repaid, six years ahead of time, $5.1 billion along with $865 million in interest and fees to the US Treasury.

It repaid another $1.7 billion in principle, interest and fees to the government-owned Export Development Canada.

After going through a sweeping bankruptcy reorganization underpinned by the government loans, the company said it was "returning as a competitive force in the global automotive industry."

Earlier this month, Chrysler raised $8.8 billion in private loans and debt placements as well as new equity from key shareholder Fiat, in order to retire the government financing.

That will save it an estimated $350 million a year in interest expenses, Chrysler said.

"Less than two years ago, we made a commitment to repay the US and Canadian taxpayers in full and today we made good on that promise," said Chrysler and Fiat chief executive Sergio Marchionne in a statement.

"Paying back the loans, along with the financial community's investment in our refinancing packages, marks another step in the company returning as a competitive force in the global automotive industry."

President Barack Obama, who went out on a political limb when his administration pushed to use financial industry rescue funds for big carmakers Chrysler and General Motors, called the repayment a "significant milestone" for the company and for people who rely on the auto industry.

"Supporting the American auto industry required making some tough decisions, but I was not willing to walk away from the workers at Chrysler and the communities that rely on this iconic American company," the president said in a statement.

"While there is more work to be done, we are starting to see stronger sales, additional shifts at plants and signs of strength in the auto industry and our economy, a true testament to the resolve and determination of American workers across the nation," he said.

Canada, which has some 8,000 Chrysler workers in three factories, also applauded the move.

"This marks an important step forward in Chrysler's recovery and underscores the continued strengthening of the North American auto industry," Finance Minister Jim Flaherty said.

The Treasury said it had received a total of $10.6 billion in payments of principle, interest and fees from Chrysler, all related to loans from the Troubled Asset Relief Program, which was originally designed to rescue troubled financial institutions.

It also holds a 6.6 percent stake in Chrysler, and said it was "unlikely to fully recover" its outstanding $1.9 billion investment in the company.

Canada also holds a 1.7 percent stake in the company.

But the Treasury said the rescue had paid off.

"For the first time since 2004, all three American automakers have an operating profit," it said in a statement.

"Since GM and Chrysler emerged from bankruptcy in June 2009, the industry has added more than 115,000 jobs -- the industry's strongest period of job growth in more than a decade."

On May 2 Chrysler posted its first post-bankruptcy quarterly net profit of $116 million for the first quarter, compared with a net loss of $197 million in the year-ago period.

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

AFP

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