DETROIT — Chrysler paid back on Tuesday $7.6 billion in loans from the American and Canadian governments, paving the way for its Italian partner, Fiat, to increase its control over the Detroit carmaker.
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Sergio Marchionne, right, Chrysler's chief, and Ron Bloom, of President Obama's auto task force, at the Sterling Heights, Mich., plant on Tuesday.
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The repayment of loans and interest owed to the United States Treasury and Export Development Canada is a significant milestone in Chrysler’s methodical comeback from bankruptcy in 2009.
Now the company’s revival will enter a new phase that depends heavily on its alliance with Fiat, which on Tuesday increased its stake in Chrysler to 46 percent, from 30 percent.
Fiat will most likely increase its ownership to 51 percent by the end of the year. Terms of Chrysler’s federal bailout allow the Italian company to gain an additional 5 percent interest when a prototype of a new fuel-efficient compact car is ready for production in the United States.
Sergio Marchionne, who is chief executive of both auto companies, said the new car should be completed by December and would be produced beginning next year at a Chrysler plant in Illinois.
“It’s my intention for us to have the car ready by the fourth quarter,” Mr. Marchionne said at a ceremony marking the loan repayments.
Mr. Marchionne was joined at the event by Ron A. Bloom and Brian Deese, two members of the auto task force that was assembled by President Obama to shepherd Chrysler and General Motors through bankruptcy reorganization with taxpayer aid.
Many people in the auto industry were skeptical that Chrysler could survive even after its financial bailout.
But at the ceremony held at a Chrysler plant outside Detroit, Mr. Marchionne said the company had defied the odds by turning out new, improved products that are being sold at a profit.
“We have collectively found the strength to fight against this death sentence placed on our company from the very beginning,” Mr. Marchionne said to the cheers of hundreds of workers at the plant in Sterling Heights, Mich.
Mr. Marchionne made his remarks in front of a red, white and blue sign that said “PAID” in huge letters. Retiring its government loans will not only save Chrysler an estimated $350 million a year in interest payments, but it should also bolster its image in the eyes of American consumers.
“The loans are no longer a negative in the marketplace,” said Rebecca Lindland, an analyst with the research firm IHS Automotive. “It also frees up more cash for them to build a better product.”
Chrysler was able to repay the loans because it had negotiated new financing with a consortium of investment banks that includes a term loan of $3 billion, debt securities totaling $3.2 billion and a revolving credit facility of $1.3 billion.
The loan repayment was also helped by funds from Fiat, which paid Chrysler $1.3 billion to increase its stake to 46 percent.
Enlarge This Image
Fabrizio Costantini/Bloomberg News
Sergio Marchionne, right, Chrysler's chief, and Ron Bloom, of President Obama's auto task force, at the Sterling Heights, Mich., plant on Tuesday.
Add to Portfolio
General Motors
Fiat SpA
Go to your Portfolio »
The repayment of loans and interest owed to the United States Treasury and Export Development Canada is a significant milestone in Chrysler’s methodical comeback from bankruptcy in 2009.
Now the company’s revival will enter a new phase that depends heavily on its alliance with Fiat, which on Tuesday increased its stake in Chrysler to 46 percent, from 30 percent.
Fiat will most likely increase its ownership to 51 percent by the end of the year. Terms of Chrysler’s federal bailout allow the Italian company to gain an additional 5 percent interest when a prototype of a new fuel-efficient compact car is ready for production in the United States.
Sergio Marchionne, who is chief executive of both auto companies, said the new car should be completed by December and would be produced beginning next year at a Chrysler plant in Illinois.
“It’s my intention for us to have the car ready by the fourth quarter,” Mr. Marchionne said at a ceremony marking the loan repayments.
Mr. Marchionne was joined at the event by Ron A. Bloom and Brian Deese, two members of the auto task force that was assembled by President Obama to shepherd Chrysler and General Motors through bankruptcy reorganization with taxpayer aid.
Many people in the auto industry were skeptical that Chrysler could survive even after its financial bailout.
But at the ceremony held at a Chrysler plant outside Detroit, Mr. Marchionne said the company had defied the odds by turning out new, improved products that are being sold at a profit.
“We have collectively found the strength to fight against this death sentence placed on our company from the very beginning,” Mr. Marchionne said to the cheers of hundreds of workers at the plant in Sterling Heights, Mich.
Mr. Marchionne made his remarks in front of a red, white and blue sign that said “PAID” in huge letters. Retiring its government loans will not only save Chrysler an estimated $350 million a year in interest payments, but it should also bolster its image in the eyes of American consumers.
“The loans are no longer a negative in the marketplace,” said Rebecca Lindland, an analyst with the research firm IHS Automotive. “It also frees up more cash for them to build a better product.”
Chrysler was able to repay the loans because it had negotiated new financing with a consortium of investment banks that includes a term loan of $3 billion, debt securities totaling $3.2 billion and a revolving credit facility of $1.3 billion.
The loan repayment was also helped by funds from Fiat, which paid Chrysler $1.3 billion to increase its stake to 46 percent.
