Chrysler Financial gets $1.5 billion loan
Detroit News just broke the news that the U.S. Treasury will lend $1.5 billion to Chrysler Financial, following a $6 billion loan to GMAC which allowed GM dealers to offer low-interest loans to a wider variety of people. According to Chrysler “money man” Ron Kolka, as quoted in The Detroit News, this led to Chrysler buyers switching to GM to get financing.
In December 2008, according to the newspaper, Chrysler Financial made just 3,800 vehicle loans, while in December 2007 it made 50,000 such loans; that was a contributing factor behind a 53% drop in sales.
The five-year $1.5 billion loan will be backed by an interest in new loans; Chrysler Holding will be a guarantor for portions of the loan, and Chrysler Financial is required to cut bonuses to senior executives by 40% and to refrain from having “golden parachutes.”
As a condition of the GMAC loans, both Cerberus and GM, which shared the company 51/49, had to agree to sell most of their GMAC ownership.
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