Chrysler Financial gets $1.5-billion TARP loan
The federal government pumped more money into the struggling U.S. auto industry Friday, lending Chrysler Financial $1.5 billion from the $700-billion financial bailout fund to help spur new car loans.
The five-year loan to Chrysler’s lending arm was announced by the Treasury Department in what probably will be the last payment from the fund by the outgoing Bush administration. It brought the total government aid committed to Chrysler and General Motors Corp. and their financing units to $24.9 billion as federal officials try to revive U.S. auto sales and keep the companies from filing for bankruptcy.
Chrysler Financial will use the $1.5 billion to help Chrysler and its dealers make new auto loans to consumers, Chief Executive Thomas F. Gilman said.
“This funding will better position us to withstand the current economic challenges until funding becomes available through more traditional commercial sources,” Gilman said.
The money to Chrysler Financial follows a $5-billion injection of government money last month into GMAC, the lending arm of General Motors. But the money will flow differently to Chrysler Financial.
The $1.5-billion loan goes to a new “special purpose entity” created by Chrysler Financial that would not be affected should Chrysler file for bankruptcy. Chrysler Financial still must comply with limits on executive compensation under the Troubled Asset Relief Program, or TARP, and the government will get $75 million in stock warrants in the new entity.
GMAC became a bank holding company and received a direct injection of cash from TARP on Dec. 29, similar to other injections the Treasury Department has made to financial institutions to loosen credit.
With GM and Chrysler teetering near bankruptcy filings, the Bush administration last month agreed to lend the companies a total of $17.4 billion under guidelines that require turnaround plans approved by the government.
A government official said Friday that the Treasury Department had been in discussions with Ford Credit, the lending arm of Ford Motor Co., about possible government assistance. Ford confirmed the discussions.
“We have been maintaining ongoing dialogue with the government on ideas to help unfreeze the credit markets,” Ford said in a written statement. The company stressed that it was not seeking government money for its automotive operations.
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jim.puzzanghera @latimes.com
