Chrysler to break off US Government Ties
Baku, June 3 (AZERTAC). Chrysler Group LLC, said Thursday that it will soon sever its ties with the US Government after most, but not all, of the bailout loans it got during the recession are repaid.
The company said that it plans to buy the US Treasury`s 6 percent interest in Chrysler for $500 million. Once the deal is closed, the US government will no longer hold a stake in the auto company. treasury officials said it could take up to three months to make sure the agreement meets regulatory approvals, but it will likely close more quickly than that.
The deal would give Fiat SpA a 52 percent stake in the automaker, just two years after it agreed to manage Chrysler after it went bankrupt. President Barack Obama is expected to announce the agreement Friday during a trip to a Chrysler facility in Toledo, Ohio.
"We didn`t do this to maximize return. We did it to save jobs," Treasury Secretary Timothy Geithner said during a trip to Detroit in April. On Thursday, Geithner noted that GM and Chrysler are hiring again and making new investments at U.S. plants, which wouldn`t have happened had they gone bankrupt.
The US government is expected to lose $1.3 billion in the deal. The government authorized $12.5 billion in loans to Chrysler in 2008 through Chrysler`s bankruptcy filing in the summer of 2009. So far Chrysler has repaid $11.2 billion, which includes $2 billion in undrawn loans, and it seems unlikely that the government would recover the rest.
Fiat also agreed to pay $75 million for the right to purchase the Chrysler shares held by a trust for retired autoworkers.
The government still owns 26.5 percent of General Motors Company (NYSE: GM) after selling part of its stake in GM`s initial public offering in November. GM received $49.5 billion from the government in exchange for a 61 percent stake in the company.
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