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Chrysler Repays Bailout Funds

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author photo by Autotrader May 2011

Like many Americans, Chrysler found itself in serious financial trouble during the recent economic recession. Losses mounted, sales plummeted, and ultimately the automaker needed a government bailout to stay afloat. But on Tuesday, Chrysler announced some good news: it has fully repaid its bailout funds to the tune of $7.6 billion.

According to Chrysler, the funds – which totaled $5.9 billion from the US government and $1.7 billion from Canada – were paid off six years ahead of schedule, and less than two years after they were given out. Chrysler says the early payoff will save nearly $300 million annually in interest payments.

"Less than two years ago, we made a commitment to repay the US and Canadian taxpayers in full and today we made good on that promise," said Sergio Marchionne, Chrysler's chief executive, at a ceremony at a Sterling Heights, Michigan, plant. "Paying back the loans… marks another step in the company returning as a competitive force in the global automotive industry."

Of course, Chrysler couldn't have turned around its finances so quickly without a little help – mostly from Italian automaker Fiat, which has invested handsomely in Chrysler's future. With Tuesday's announcement, Fiat invested another $1.3 billion, upping its ownership stake in the American auto giant to 46 percent. The rest of the funds Chrysler used to pay off the bailout came from a $3.2 billion bond sale and a low-interest $3 billion bank loan.

"Chrysler's repayment of its outstanding loans to the US Treasury and American taxpayers marks a significant milestone for the turnaround of Chrysler," said President Barack Obama, whose administration oversaw the auto industry bailout in 2009. "While there is more work to be done, we are starting to see stronger sales, additional shifts at plants and signs of strength in the auto industry and our economy."

Now that Chrysler is out of debt with the government, it can focus more directly on its products. Sales have been strong in 2011, with April totals up a healthy 22.5 percent – including nearly 65 percent from its Jeep brand alone. Also boosting Chrysler this year will be the cheeky Fiat 500, which finally went on sale last month. But competition from rivals is fierce, and Chrysler will need to keep coming out with exciting, desirable products to continue growing.

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Chrysler Repays Bailout Funds - Autotrader