Chrysler turns down $3.5 billion DOE loan, cites heavy restrictions
Chrysler has decided to withdraw its bid for a $3.5 billion loan from the Department of Energy, which would have aided the Michigan-based car company in restructuring their plants to make more fuel-efficient vehicles. Chrysler cited that loan restrictions were the main reason for pulling out of the DOE deal. Despite their withdrawal, Chrysler said on Thursday that it “remains confident in its strategy to bring competitive, fuel-efficient vehicles and technologies to market on schedule.”
The DOE loan is part of a larger program titled the Advanced Technology Vehicle Manufacturing Loan Program, which was set up during the recession in 2008 to help automakers on the verge of ruin. The fund provides $25 billion to automakers for the purpose of refurbishing their facilities to invest in fuel-efficient machinery. General Motors also withdrew from a similar bid for $14.4 billion in January 2011.
DOE spokesman Damien LaVera reacted to Chrysler’s decision by stating:
"While we were continuing to work with Chrysler to come to an agreement, we are pleased that they are capable of achieving their business goals without Department support. The company’s decision to move forward without this loan reflects the tremendous financial turnaround that Chrysler and its workers have achieved in the past three years."
The DOE loan has seemed unlikely since January when Chrysler CEO Sergio Marchionne said that his company had been mulling over the deal for months, because of the restrictions involved. Specifically, Marchionne stated that the federal government wanted too much collateral to back up the loans. Chrysler originally requested $7 billion, but decreased their figure to $3.5 billion, in hopes that the DOE would ease restrictions.
“The DOE’s proposed terms were very restrictive and compliance would have negatively affected our operational flexibility,” said Chrysler spokeswoman Shawn Morgan to The Wall Street Journal on Thursday.
Chrysler also turned down a $750 million government loan in 2009, because executives did not want to comply with government stipulated limits on executive pay. Chrysler Financial did, however, take $1.5 billion in federal relief as part of the bank bailout program in 2009.
Although the DOE loan is available to all automakers, just five have accepted funds. In 2009, Ford received a $5.9 billion loan, becoming the first automaker to do so. Nissan and Tesla, who received $1.6 billion and $465 million respectively, were the next two companies to receive DOE funds. The fourth ATVM loan was awarded to Fisker Automotive in the amount of $528.7 million for the development of plug-in hybrids. Most recently, the Vehicle Production Group LLC received $50 million to produce natural gas-powered wheelchair accessible vans.
Click HERE to read more about the Advanced Technology Vehicle Manufacturing Loan Program and its eligibility requirements.