Chrysler is set to pay off its government loans on Tuesday, saving it more than $300 million a year in interest payments and allowing Fiat to raise its stake in the American automaker to 46 percent, CEO Marchionne said.
It’s also a new beginning for an automaker that’s had a gut-wrenching stretch that reaches back to 1998, when the automaker was merged into Daimler-Benz AG, sold off to Cerberus Capital Management in 2007 and then left on the emergency room table in 2008 while the Obama administration and a team of high-powered financiers debated whether it was worth saving at all.
Chrysler financial took $10.5 billion from the U.S. government to survive two years ago, and it has repaid some of the money. The refinancing will allow it to retire a $5.9 billion balance on the U.S. loans and $1.6 billion to the governments of Canada and Ontario.
Sergio Marchionne, CEO of both Chrysler and Fiat, said on Monday the refinancing was a sign of Wall Street’s confidence in Chrysler about two years after it emerged from its U.S.-funded bankruptcy and took a federal bailout.
“They (investors) know that we’re here to stay, and a lot of them were and are betting on the fact that we’re going to be here for a long time,” Marchionne said at the grand opening of Fiat’s first Michigan dealership in a Detroit suburb.
Marchionne said Fiat’s stake in Chrysler will rise to 51 percent when Chrysler produces a 40 mpg car in the U.S. starting next year. He said Fiat can raise its stake as high as 76 percent if it exercises all options, including buying part of the 59-percent stake now owned by a health care trust fund for union retirees.