Chrysler Group repays $7.6B in government loans

STERLING HEIGHTS, Mich. -- With a few computer keystrokes, Chrysler Group LLC sent $7.6 billion to the U.S. and Canadian governments Tuesday, paying off most of the bailout money that saved the company from financial disaster two years ago.

The repayment was a sign of the automaker's comeback. In 2009, Chrysler almost ran out of cash and went into bankruptcy. Now it's got a new lineup of Jeeps and cars and just earned its first profit in five years.

To pay off the governments, Chrysler raised $3.2 billion through a bond sale and took out $3 billion in lower-interest bank loans.

It also will use a $1.3 billion investment from Italian automaker Fiat SpA, which kicked in the money on Tuesday. That raises Fiat's stake to 46 percent, making it the largest shareholder.

The U.S. government gave Fiat a 20 percent stake and management control of Chrysler after the Detroit automaker emerged from bankruptcy protection in 2009.

But government ownership doesn't end with the loan repayment. The U.S. Treasury still owns 6.6 percent of Chrysler, part of the original stake it got in exchange for the bailout.

Also, about $2 billion of the government aid went to parts of Chrysler that were left behind in bankruptcy, and that money hasn't been repaid. Some of it could be recouped when the government sells its stake either in a public stock offering or to Fiat, which has an option to buy it.

The government, Bloom said, will sell its stake as soon as practical, but he conceded the administration doesn't expect to get a "material portion" of the $2 billion back.

Chrysler was eager to pay back its loans in part because of the governments' high interest rates of around 12 percent, which cost the company $1.2 billion last year. The interest rates on the new loans and bonds are 6 to 8 percent, saving Chrysler $300 million a year. The company also wanted to shed its government ownership because some customers object to the bailout.

It's not the first time Chrysler had to be rescued by the U.S. government. In the early 1980s the company, led by legendary pitchman Lee Iacocca, paid off $1 billion in government-guaranteed loans in three years.