Chrysler Said To Plan To Borrow $6 Billion To Pay Off U.S. Government Debt
Chrysler Group LLC, the U.S. automaker operated by Fiat SpA, is planning to borrow about $6 billion to pay off government debt as Fiat moves to increase its ownership, people familiar with the plan said.
Details are still being completed on the debt and may be announced as soon as next week, said the people, who asked not to be identified revealing private plans. Chrysler has said its effective interest on the borrowings from the U.S. is as high as 14 percent and as much as 20 percent on the Canadian debt, reported Bloomberg.
Reducing the interest expense should improve profits. Sergio Marchionne, chief executive officer of both automakers, is slated to release Chrysler’s first-quarter results on May 2. He is pushing Chrysler to earn as much as $500 million this year, its first annual profit since emerging from bankruptcy reorganization in 2009.
Eileen Wunderlich, a spokeswoman for the Auburn Hills, Michigan-based automaker, declined to comment on refinancing plans.
The refinancing plan includes $1.27 billion from Fiat as part of its plan to execute an option to increase its ownership stake to 46 percent from 30 percent after the governments are repaid, said the people familiar with the plan.
The face values of the debts to the U.S. and Canadian governments are $7.53 billion, according to Chrysler’s Feb. 25 Securities and Exchange Commission filing. Those debts must be repaid before Marchionne can exercise his option to purchase the 16 percent stake.
Fiat said last week it aims to exercise that option in the second quarter. The automaker may hold an initial public offering this year or next year, Marchionne has said.
The new debt may be a mixture of loans and bonds, the people said. Marchionne wants it completed by the end of May and Chrysler executives may begin a roadshow soon after the announcement to pitch the debt as an investment, they said.
Chrysler is also expected to get about $2 billion in revolving loans, one of the people said.
Fiat gained control of Chrysler as part of the U.S. automaker’s government-backed restructuring. In exchange for sharing management and technology and for reaching operational milestones, Fiat receives as much as 35 percent of Chrysler. It currently has 30 percent. Marchionne has said he expects to get the final 5 percent by the end of the year.
In conjunction with the purchase option, the Turin, Italy- based automaker would hold a 51 percent stake.
Chrysler’s capital infusion may give the U.S. Department of Energy “additional comfort” about the automaker’s financial structure, Marchionne told analysts last week. He said that he expects that after the Fiat stake increase is completed, Chrysler will be able to make progress and obtain as much as $3.5 billion in low-interest loans.
More Industry

Autos More Appealing
Consumers gave new cars better scores again this year for design, performance and more as mass-market brands kept gaining on premium lineups, JD Power found in an annual poll.
Read More →
Used EVs Defy Overall Market
While the used-car market saw three months of price declines or stagnation, the used EV segment did the opposite – rising for three straight months.
Read More →
Gone to the Dogs
A Stellantis brand decided to have some fun with one of its SUVs’ design to address growing emphasis on family pets.
Read More →
OEM Poll Sees Industry Evolution
Kerrigan Advisors’ survey of automakers finds that tariffs, technology, network tightening and other factors are poised to reshape auto retail.
Read More →
Luxe N.C. Dealerships Change Hands
A collection of Italian and English brand franchises were handed off to the owner’s friend in the business and include the Carolinas’ only Ferrari retail stores.
Read More →
Exposure Drives Interest in Chinese Cars
At a recent demonstration, consumers had the chance to ride in a Chinese-branded vehicle, a firsthand experience that improved their perceptions and purchase intent.
Read More →
Automotive Consumers Sink Further in Debt
Most financing metrics hit records in the second quarter as more buyers locked themselves into long terms and high monthly payments.
Read More →
Agent Advocate
Rob Mancuso, who comes from a long line of auto dealers, values general agents’ place in the industry and makes a case for them taking an even bigger seat at the table.
Read More →
Driving Under Distraction
Though consumers gave higher marks to new vehicles in JD Power’s most recent initial-quality poll, high-tech interference worsened, pointing to craving for simplicity.
Read More →
Affordable New Cars a Thing of the Past
More than one out of five new vehicles sell for more than $60,000, according to Edmunds. That's up 7% compared to prepandemic 2019.
Read More →