Chrysler, AFSA lobby Congress for auto loan bailout

Chrysler wants the federal government to include auto loans in the $700 billion bailout the Bush administration has proposed to Congress.

Jim Press, Chrysler president and vice-chairman, confirmed the automaker had spoken with government officials and company spokeswoman Linda Becker said Chrysler is studying a proposal put forward by the American Financial Services Association (AFSA), a trade group representing auto-finance companies. The AFSA is mounting a lobbying effort add delinquent car notes to the types of “troubled assets” eligible for purchase by the government. It is estimated that about ten percent of the $200 billion in outstanding U.S. auto loans fall into this category, putting a $20 billion price tag on aid to the auto finance companies.

Any bailout for auto loans would be separate from the $25 billion in loan guarantees currently being considered for automakers.

In a statement issued Tuesday, AFSA said it wants “auto and other finance companies” added to the types of eligible institutions. The current list includes banks, thrifts, credit unions and insurance companies.

AFSA president and CEO Chris Stinebert said, “While auto finance delinquencies may be higher now than last year, they remain at low levels. However, as a result of the ripple effect of the credit crunch in the mortgage sector, the ability of finance companies to secure credit lines from investors has been brought to a virtual standstill.”

Stinebert added that without Congressional help, manufacturers may find themselves unable to finance new vehicle purchases.

Cerberus Capital Management LP, which owns the majority of Chrysler, Chrysler Financial, and GMAC Financial Services, would be a major beneficiary of such a move.

Chrysler is the only Detroit automaker to confirm it is currently considering in the lobbying effort. GMAC had no official comment, though spokeswoman Gina Proia said, “Generally, we support any measures that could bring some stability to the market.”

Ford is not participating, even though Jim Farley, its sales and marketing chief, has said tight credit markets are hurting auto sales by making it more difficult hard for consumers to qualify for a loan. Ford Credit spokeswoman Brenda Hines said the company does not have any loans it needs to unload on the government. Unlike GMAC, which racked up staggering losses because of subprime mortgages financed by its Residential Capital subsidiary, Ford’s consumer credit operation left the subprime auto loan market years ago and never offered mortgages.