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Chrysler Starts to Close Out Debt

Posted: May 19, 2011 10:11 a.m.

Chrysler owes the U.S. government $7.5 billion, but the automaker is close to paying off its debt.

The Associated Press reports, “The company has lined up investors to help it refinance $7.5 billion in loans from the U.S. and Canadian governments, three people briefed on the matter said Wednesday. Under the deal, the company would take out $2.5 billion in bank loans and sell $3.5 billion worth of bonds to investors. Italy's Fiat, which has management control of Chrysler, would kick in $1.3 billion more to raise its stake in the U.S. carmaker.”

This is an important move for Chrysler. The Associate Press notes that eliminating debt will allow Chrysler to separate from the government, shed its image as a company that uses the government as a crutch for financial stability, reclaim shoppers who were against the bailout and decrease Chrysler’s interest payments, which slowed the automaker’s loan repayments. Chrysler accrued 1.2 billion in interest according to Reuters.

This announcement ushers in other positive news for the recovering automaker. CNNMoney reports that Chrysler’s sales are improving thanks to the refreshes the automaker gave its Jeep, Dodge and Chrysler products. “Since its partnership with Fiat began two years ago, Chrysler designers and engineers have been tasked with seriously revamping nearly every Jeep, Dodge and Chrysler model to fix all the things that had been keeping people from buying Chrysler products for years,” they report. “In other words, they're fixing just about everything.”

CNNMoney adds that redesigned models like the Dodge Journey, Jeep Compass and Chrysler Town & Country “helped improve Chrysler sales and should help Chrysler's financial position, which was beginning to improve even before the redesigned cars hit the market.”

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