Chrysler desperately needs U.S. loans that GM rejected

GM has made an important stride in counterbalancing the stigma it retained from its government bailout, by withdrawing its application for $14 billion in low-interest loans from the government.  At the same time, Chrysler is furiously lobbying Washington for $3 billion in subsidized loans, and has made it clear that these loans are crucial to its turnaround.

Both companies applied for loans through a DoE program designed to spur the development of more fuel efficient vehicles in 2009.  While Chrysler’s loan is still pending, it cannot refinance its costly bailout loans before  its expected IPO this year.

Marchionne has added that a three-way discussion between the Treasury, DoE, and Chrysler would be needed to sort the issue out.  Chrysler suffers right now because their fleet ranks last in fuel-economy among the major automakers, and says that these loans could drive a sharp improvement, while delaying their issuance could be costly.

The issue here is one of assets.  Right now, th etreasury lays claim to all that Chrysler has.  One stipulation of the DoE loans is that the agency must take first lien on all property bought and developed using that money, so that in the event of bankruptcy, the agency is covered.

-By: Stephen Calogera

Source: Automotive News