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GM withdrew its application for $14 billion in low-interest loans from the U.S. government on Thursday, saying it had enough cash to fund vehicle development as fuel economy standards tighten over the next five years, Reuters reported.
But Chrysler, which reports fourth quarter earnings on January 31, has made it clear the same Department of Energy loans GM has spurned are crucial to its turnaround.
In 2009, both GM and Chrysler applied for loans through a Energy Department program designed to spur the development of more fuel efficient cars.
Chrysler's $3 billion loan application is still pending, denying the automaker a chance to refinance its pricey bailout loans before an expected initial public offering this year.
"It just underlines the special challenges for Chrysler," Sean McAlinden, chief economist for the Center for Automotive Research, said of GM's decision to withdraw its application.
"They've got another really tough year and they need the money."
Adding to Chrysler's challenges is the fact the federal loan approval process appears to have bogged down over collateral that could be pledged by Chrysler.
Chief Executive Sergio Marchionne, who expected the money by the end of 2010, said last week he still expected Chrysler would receive the loans.
"Am I concerned with the fact that this thing is taking longer than I thought? The answer is absolutely yes," Marchionne told reporters.
He added that a "tripartite" discussion between Treasury, the Department of Energy and Chrysler would be needed to sort out the issue.
At the height of the financial crisis, U.S. government officials hotly debated whether Chrysler was worth saving. The company ultimately filed for bankruptcy and is now managed by Italy's Fiat SpA (FIA.MI).
Chrysler's latest vehicles, such as its 2011 Jeep Grand Cherokee, have been well received, but its 2010 lineup ranks last in terms of fuel economy among major automakers, according to the Environmental Protection Agency.
"They're way behind the eight ball and technology keeps changing," said Patrick O'Keefe, a financial transactions consultant in the auto industry with O'Keefe and Associates. "It's hard to play catch up."
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