The US Treasury said on Friday it had finalized a US$4 billion loan to troubled cash-strapped carmaker Chrysler.
“Treasury today finalized the loan transaction for Chrysler car company and funded the full amount of US$4 billion,” Treasury spokesman Brookly McLaughlin said in a statement.
Chrysler Chairman and CEO Bob Nardelli said the loan would help the company “bridge the current financial crisis.”
“This initial loan will allow the Company to continue an orderly restructuring, while pursuing our vision to build the fuel-efficient, high-quality cars and trucks people want to buy, will enjoy driving and will want to buy again,” he said in a statement.
The loan is part of a US$13.4 billion rescue package the US government approved last month for General Motors and Chrysler to stave off collapse amid tight credit and dismal sales.
The first segment of the bailout provides US$4 billion each to GM and to Chrysler, the smallest of the Big Three US automakers.
GM, the largest US automaker, was to receive an additional US$5.4 billion in the middle of this month and would be eligible for an additional US$4 billion from next month pending congressional action. Treasury has also provided six billion dollars in aid to GMAC, GM’s financial arm.
Under the agreement, the automakers would have to demonstrate their viability by March 31 or the government could require that the funds be repaid within 30 days.
“The objective of this program is to prevent a significant disruption of the American automotive industry that poses a systemic risk to financial market stability and will have a negative effect on the real economy of the United States,” the Treasury said on its Web site on Wednesday.
The Treasury added it would determine eligibility of participants in the program on a case-by-case basis.
The Treasury announced on Dec. 19 a massive rescue of GM and Chrysler, facing a threat of imminent bankruptcy that could create economic chaos and throw millions out of work across the country.
The money for the auto industry injection comes from the US$700 billion financial industry bailout approved last year.
Ford Motor Co, the second-largest US automaker, has asked the government for a line of credit as a backstop in the face of plunging sales.