Chrysler To Repay Bailout Loans Before 2013

AHN News Staff

Detroit, Michigan, United States (AHN) – Despite the slow recovery of Chrysler Group from the auto slump compared to Ford and General Motors, the company said it plans to repay its loans to the U.S. and Canadian governments before 2013.

The settlement of the debt would allow Fiat SpA, which operates Chrysler, to acquire a 51 percent stake in the automaker, Fiat and Chrysler Chief Executive Officer Sergio Marchionne said Monday.

Fiat currently owns 20 percent of Chrysler.

Marchionne said Fiat will increase its stake to 35 percent in 2011 by meeting restructuring targets made in 2009. He added Chrysler shares would probably be publicly offered by the second half of next year.

The planned IPO would have better share prices if Chrysler’s capital structure modified. The CEO said that goal could be achieved by refinancing its U.S. and Canadian government loans, which have effective interest rates of up to 20 percent. Marchionne said the interest payments prevent Chrysler from registering a net profit.

The combined bailout debt of Chrysler is $7.46 billion. While a portion of the debt package is set to mature by the end of 2011, but the bulk will mature in 2017.

While Ford and GM publicly traded its newly issued stocks in mid-November, Marchionne promised Chrysler would successfully recover from its bankruptcy, but at a longer timeframe compared to its two competitors.

Chrysler’s sales in the U.S. are less than 50 percent of 2005 levels and their new models are still in early stages.

The company, however, managed to roll out its new Dodge Durango sport utility vehicle in mid-November at the Los Angeles car show and the Fiat 500 micro car, which Chrysler dealers will start selling soon in the U.S.

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