Chrysler Repays Bailout Debt, Fiat Increasing Its Share

Sergio Marchionne

By refinancing its loans and getting $1.3 billion from Fiat (now holding 46 percent), Chrysler was able to repay $7.6 billion of bailout debt yesterday to the U.S. and Canadian governments. Applause echoed everywhere, except from the usual skeptical sources.

The amount included $1.8 billion in interest, and the company was eager to get out from under that high-cost debt, which bled it for $1.2 billion last year.

Chrysler could pull this off, six years before the due date, for two big reasons. One is Sergio Marchionne’s leadership and smart financial moves. Second is that sales are up (22.5 percent, through April), largely owing to refreshed Jeeps, Ram trucks and crossovers.

All of which gave the investment market confidence. Now, however, the company must do the harder thing—using Fiat technology, get its small- and midsize-car lineup designed, built and sold to the public.

What happens on that score over the next year will be one of the most interesting stories in the auto industry.

The Fiat 500 is a niche car, getting lots of press, but still a niche car. The Chrysler 200 is still a Chrysler Sebring. The big question: What else is in the pipeline?

Fiat logoFiat is positioned to move toward at least a 51 percent share by year’s end, and there will likely be an IPO coming later this year or next. The U.S. government still owns 6.6 percent of Chrysler, the Canadian government 1.7 percent and a UAW health-care fund 45.7 percent. Fiat has an option to acquire 40 percent of the latter.

So, Chrysler has emerged from the bailout both lucky and smart. Where it goes next in its integration with Fiat will tell the story.

How likely are you to seriously consider buying a Chrysler product in the coming year?

—jgoods

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2 Comments

  1. I guess I don’t see how Chrysler can be seen to have repaid it’s government debt if the US and Canadian governments own close to ten percent of the company. You can call it “ownership” but it’s still tax money propping up a private company. I won’t consider Chrysler to be a credible business (or consider buying a car from them until they’ve paid off the governments AND the UAW.
    GM is even worse, they’re acting like they are rolling in piles of legitimately earned cash (and wanting to pay big bonuses to their clueless and inept managers) when they still owe the US government billions. How can they declare a profit with these big government loans outstanding? GM has largely turned into a corrupt accounting racket the past thirty years or so (since accountant Roger Smith taught them how to cook the books)and the US government should flex its ownership muscle and declare “all ‘profits’ go to pay off government debt first.”

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