Chrysler announces bailout loan repayment plans

The key roadblock preventing Fiat SpA from possessing their desired 51% of the Chrysler Group is the amount of debt owed to the US and Canadian governments but the American automaker announced this morning that they will be paying off the entirety of these loans – freeing up Fiat to make the final moves to have their majority stake in the Chrysler Group.

This morning’s statement from Chrysler was brief but to the point. It explained that during the second quarter of 2011 (that’s now, by the way), they plan to pay back the full amounts owed to the US and Canadian governments, as well as the debt owed to the Ontario government. The Chrysler Group has seemingly procured the funds to pay off the high-interest loans once referred to as “shyster loans” by Fiat and Chrysler CEO Sergio Marchionne via new term loans and newly issued debt securities. A portion of the payoff amount will also come from Fiat as a portion of the stock purchase.

Once Chrysler no longer owes money to the various governmental bodies around North America, Fiat will be able to make the move to purchase roughly 16% of the American automaker which will effectively raise the Italian company’s ownership to 46%. The last 5% needed to reach Marchionne’s goal of 51% will come when Fiat is able to produce a car in the US for the US market that yields better than 40mpg; which will most likely involve the re-introduction of the Fiat brand in North America.

The second quarter of 2011 (you know, if math isn’t your thing) ends on June 30th so the repayment of the “bailout loans” by the Chrysler Group will likely be made within the next 62 days. Once the repayment and ensuing purchase is made, General Motors will remain as the only automaker still under the control of the US government. This also means that Chrysler can begin paying their executives whatever it wants since the feds won’t have control over the company any longer so it will be interesting to see how things change – even though company CEO Marchionne didn’t receive any salary in 2010.

Pictured above, Sergio Marchionne with Dodge brand CEO Ralph Gilles (left) and Fiat brand US CEO Laura Soave (right)

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