The US Treasury Department said on Friday it would provide a US$1.5 billion loan to Chrysler LLC’s financing arm and the automaker announced it will immediately use the money to offer zero-percent financing on several models and expand lending to car buyers with less than ideal credit.
The Treasury said the new aid is in addition to the US$17.4 billion in loans earmarked for Chrysler and General Motors Corp last month in an effort to buy time for the two companies to reorganize and ultimately return the domestic auto industry to profitability.
“This funding will better position us to withstand the current economic challenges until funding becomes available through more traditional commercial sources,” Thomas Gilman, Chrysler Financial’s vice chairman and chief executive, said in a statement.
Ford’s financing arm, Ford Motor Credit, has been in discussions with Treasury officials in an effort to tap into funding from the government’s Term Asset-Backed Securities Loan Facility spokeswoman Margaret Mellott said on Friday.
Ford, like Chrysler, is waiting on a decision from the Federal Deposit Insurance Corp on whether it can become an industrial loan corporation. That would allow the government to guarantee its debt and make it more appealing to investors.
Chrysler vice chairman and president Jim Press said the new loan will allow Chrysler Financial to provide more customers with affordable financing.
Battered Chrysler saw its sales plunge 53 percent last month, far worse than for GM or Ford Motor Co, and analysts have said it probably won’t survive the year as an independent company — despite the US$4 billion loan it received from the government. Chrysler had been counting on an additional US$3 billion in aid for Chrysler Financial.
Chrysler Financial will report to Treasury on its use of the money and other financial information, but government officials may block some of the details from public disclosure, the official said.
Unlike GM and Ford, Chrysler is owned by a private equity firm, Cerberus Capital Management LP, and is not required to publicly release details of its finances.
GM’s financing arm, GMAC LLC, which is also controlled by Cerberus, received US$5 billion from the Treasury Department late last month.