Chrysler LLC on Friday received an initial $4 billion emergency loan from the US government, two days after the government completed a parallel payout to its larger rival General Motors Corp. "This initial loan will allow the company to continue an orderly restructuring," Chrysler Chief Executive Bob Nardelli said in a statement.
US Treasury Department spokeswoman Brookly McLaughlin confirmed that the government had sent the $4 billion in funds to Chrysler on Friday. General Motors Corp received $4 billion in emergency loans on Wednesday. Both Chrysler and GM have said they need the infusion of government cash to meet payouts to suppliers at a time when a plunge in auto sales has drained their cash holdings.
Officials have not spelled out why the loan to GM and a separate $6 billion funding for its affiliated finance firm GMAC were completed ahead of the Chrysler transaction. In an email to employees, Nardelli suggested that the complexity of the deals had delayed the first payout to Chrysler, which had been expected to be completed before the end of the year. "The Treasury Department has been working to complete the multiple, complex financial arrangements quickly and sequentially. The magnitude of these discussions was significant," Nardelli said.
When major automakers release results on Monday, December auto sales are expected to show that industry-wide sales fell to the lowest full-year level since 1992. Under terms of the government bailout, Chrysler and GM will have to submit restructuring plans by mid-February and demonstrate that they are viable by the end of March.
Chrysler is controlled by Cerberus Capital Management, and as the only privately held of the Detroit-based automakers it faced the most scrutiny in congressional hearings on the proposed bailout for the industry. Cerberus also owns 51 percent of GMAC. The Bush administration approved a $17.4 billion bailout for the auto operations of GM and Chrysler in December.
Of that total, GM has been promised another $9.4 billion in government loans under that program in addition to the $4 billion payment made on Wednesday. The final $4 billion of the bailout approved for GM will require Congress to approve the funding.
Chrysler was given $4 billion by the US government after asking for $7 billion. The bailout represents the second US government rescue of Chrysler in 28 years. Rival Ford Motor Co has not sought government loans but has asked for a $9 billion line of credit it could tap if business conditions worsen beyond its projections.
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