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Despite criticism by Republican lawmakers, the Department of Energy loan program designed to encourage alternative vehicles is ready to resume.
Elon Musk, Tesla’s ever enigmatic CEO, announced over Twitter that the company will likely repay its government debt by Wednesday, May 22.
The U.S. Department of Energy recovered $21 million from Fisker Automotive, the floundering company behind the Karma plug-in hybrid luxury car.
During the closing speech at this year’s National Automobile Dealers’ Association convention in Las Vegas on February 6, former president George W. Bush said he’d bail out US automakers again in a heartbeat if he had to.
Speaking in front of some 22,000 dealers from the US and around the world, the former president (shown above visiting the GM plant in Fairfax, KS while still in office), said that although he was a firm believer in the free market economy and corporations having to pay for consequences resulting from bad decision making; he also believed stepping in to save Chrysler and General Motors was the right thing to do.
“Sometimes circumstances get in the way of philosophy,” he said, yet if it came down to saving the US auto industry, “I would make the same decision again.”
While still in office, Bush pushed through a rescue package of some $25 billion in emergency aid; $4 billion set aside for Chrysler, while some $13.4 was allocated to GM. This was followed by an additional $60 billion from the Obama administration in 2009.
Chrysler paid back its loans last May, six years ahead of schedule and posted a net profit of $183 million for 2011, it’s first time in the black since 2005. GM, so far has paid back about $23 million of the money it borrowed, though some 26 percent of the company is still owned by the US Treasury.
Bush’s speech at the NADA convention was littered with humor, including remarks that he missed some of the perks of being C-in-C. “I had to stop at some of the stoplights coming from the airport,” he said, jokingly.
[Source: Detroit Free Press]
Late Thursday night the US Treasury Department agreed to sell its remaining 6% stake in Chrysler to Fiat, with a price tag of $500 million. And with this decision, not only does the Italian carmaker control Chrysler, but now the government finally gets rid of its involvement with the auto industry, once and for all. “As Treasury exits its investment in Chrysler, it’s clear that President Obama’s decision to stand behind and restructure this company was the right one,” said Tim Geithner, Treasury Secretary.
And with Fiat claiming its share of the Big Two Point Five, we give them a toast of “viva gli sposi!” and hope this whirlwind European romance fares better than the “merger of equals.”
[Source: Wall Street Journal]
It’s been a dramatic week at Chrysler‘s financial department. Now that Chrysler’s paid off its bailout loan from the government, Fiat is looking to step in and take the government’s remaining share off its hands.
Fiat already holds a not-insubstantial 46 percent share in Chrysler. But even though Chrysler and the U.S. and Canadian governments have finally completed business, the two still hold a 6.6% share in equity stakes, with 1.7% of that belonging to Canada and the rest to the U.S. Treasury Department.
“This has been a memorable week for Chrysler as well as Fiat,” said Gualberto Ranieri, Chrysler spokesman, “and it is consistent with the strategy of building a stronger partnership.”
Fiat and the Treasury Department have until June 10th to come to an agreement. If the deal goes through, Fiat will become a majority shareholder at 52.6%, and like most Americans, Chrysler will be able to point to their Italian heritage with gusto.
[Source: Detroit News]
Chrysler Group LLC has just announced that it plans to fully repay the loans it took from the U.S. and Canadian governments by the middle of this year.
In a statement from the auto maker, it says “Chrysler Group intends to complete the repayment during the second quarter of 2011 from proceeds of a new term loan facility and newly issued debt securities to be offered and sold to institutional investors in a private offering exempt from registration under the U.S. Securities Act of 1933.”
Chrysler wants to repay the government loans as quickly as possible due to their high interest rates, which stand at 14% for the U.S. loan and as high as 20% on loan from the Canadian Government.
Chrysler and Fiat CEO Sergio Marchionne said that these loans would cost $500-million in just interest, which would severely affect the company’s ability to make a profit. In order to pay off these loans, Fiat is looking to buy an additional 16% stake in Chrysler at a reported $1.27-billion. Fiat currently owns 30% of Chrysler Group LLC. Chrysler will also look at private investors to see if it can essentially get a better interest rate compared to the government loans, which currently sit at $7.53 billion.
Fiat can only purchase the extra stake in Chrysler once this debt is wiped clean. This debt-refinancing deal is the only hope for the struggling car maker to start earning a profit in the near future.
It’s no secret that Saab has been struggling since becoming ‘independent.’ The company, purchased from GM by Spyker last year has continued to face financial and supply problems, which has stunted production and resulted in sales falling far short of projected targets.
As a result, the company, in order to help pay for parts and get production rolling again, has been selling off company assets and or/ re-leasing them in some cases.
However, another issue concerns the outstanding loan given to Saab by the Swedish Government through the European Investment Bank. With the company facing a sizable number of obstacles, there are those who feel the chances of repaying back that money are questionable at best and some assurance is needed.
As a result, perhaps not surprisingly, the Swedish media has been circulating rumors that the government had been encouraging Volvo (now owned by China’s Geely Automotive) to acquire Saab in a possible takeover.
However, Volvo has now gone on the record, stating that no such talks have taken place and nor have any been planned for the future. In the meantime, Saab CEO Victor Mueller, is continuing to look for other sources to tap into for capital, including a number of Chinese automakers.
Back before the Spyker deal went through, Saab had been in talks with China’s BAIC, which had expressed interest in buying the Swedish automaker, lock, stock and barrel from GM. In the end BAIC simply acquired ‘old’ Saab assets, including all the production tooling for the outgoing 9-3. However, given the current situation at Saab itself, there might be a strong possibility that BAIC could get its hands on more than just former assets of the Swedish automaker.
Last year, some American car companies looked to their government for financial help to keep them afloat and use the money to develop new products. Some of them have actually used the money properly and produced some decent new models.
Over in the U.K., Lotus is looking at the British government to help out in the same capacity. Lotus is saying, that unless the government backs them up, they will have to resort to looking at producing vehicles outside of the United Kingdom.
This will not only affect jobs in its homeland, but would also mean that future products, like the highly anticipated new Esprit (above) will be built in either Austria (Magna) or Finland (Valmet).
Lotus is asking for a chunk (although no official amount is known) from the Regional Growth Fund, a program designed to help local industry and businesses. The decision will be announced by the early part of April. We’ll keep you posted on this developing story.
As Europe struggles to deal with economic uncertainty in wake of the P-I-G-S crisis, General Motor’s European operations has elected to withdraw its application for government Loan Guarantees. According to sources within GM, the process of securing the loan guarantees has become increasingly complex and is taking longer than anticipated. Although some governments had already committed loan guarantees – particularly Spain and the U.K., uncertainty from others, including Germany, at a time when GM has already committed it’s Opel/Vauxhall brands to new programs and technologies, means that the General has decided to withdraw all applications and instead source the money required internally.
In response to the announcement, Nick Reilly, President of GM Europe and Chairman of Opel/Vauxhall’s management board had this to say. “We appreciate the support indicated by certain governments, especially the U.K. and Spain, but we need to move on. The decision of the German government last week was disappointing and means the conclusion for these guarantees are likely months away. We cannot afford to have uncertain funding plans and time consuming, complex negotiations at this time, when we need to keep investing in new products and technologies. To be clear, our funding needs have not changed and we are grateful to the decision and support of our parent company which will allow us to move forward in this very competitive industry.”
Prior to the announcement the U.K. government had already stated it would commit 330 million Euros (approximately $407 million) worth of Loan Guarantees and the Spanish government a similar amount, this out of a total of 1.8 billion Euros (approx $2.21 billion) requested from across Europe. However with the German government seeking to enter new negotiations, GM has pulled the plug on external funding.
Instead, it will forge ahead with the 11 billion Euro investment plan into future products that was announced back in Februrary. This includes the new Opel/Vauxhall Astra and Meriva, plus the Ampera plug in hybrid, scheduled to be released next year (shown).
[Source: Spiegel Online]