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Chrysler Moves Toward Repaying Government Loans

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WWJ Photo, File

WWJ Photo, File

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  autos arrows plug v2 Chrysler Moves Toward Repaying Government Loans

AUBURN HILLS/DETROIT (WWJ/AP) – Chrysler is expected to make an important announcement Thursday on a refinancing package to repay its government loans.

The company has been talking with a number of investment banks—including Morgan Stanley, Goldman Sachs Group Inc., Citigroup Inc. and Bank of America Corp—to restructure the loans. It has wanted to have the deal finished by June.

The Associated Press quotes “a person briefed on the matter” as saying the announcement will come tomorrow afternoon, when Chrysler CEO Sergio Marchionne takes Treasury Secretary Timothy Geithner on a tour of the Jefferson North Assembly Plant, in Detroit.

Final details are expected to be revealed Monday, when Chrysler details its first quarter earnings report, and possibly its first profit. Chrysler has been making money on its core automaking operations, but the 11-12 per cent interest rates, have been the difference between a profit and a loss on the books.

For the record, Chrysler lost $652 million in 2010, but that was an improvement over an $8 billion loss in 2009. Marchionne said he expects to report net income of $200 million to $500 million this year.

Chrysler currently owes $5 billion to the U.S. government and $1.6 billion to Canada. Those loans cost the company $1.2 billion in interest payments last year.

Repayment of the loans would allow Chrysler’s parent firm Fiat, to move forward with plans announced last week to increase its Chrysler stake to 46 per cent. Fiat would be able to take majority ownership of Chrysler, when Chrysler unveils a 40 mile per gallon vehicle, likely sometime next year.

Even after repayment of the loans, the government will own 8.6 per cent of Chrysler. That would be sold off in an initial public offering of stock, either late this year, or in early 2012.

There have been reports that the Obama Administration would like to end all of its investments in both Chrysler and General Motors before the 2012 election.

The Associated Press and WWJ AutoBeat Reporter Jeff Gilbert contributed to this story.

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