Troubled Chrysler LLC late Friday received an initial $4 billion loan from the U.S. Treasury Department, part of the $17.4 billion it and General Motors Corp. had sought to help the companies stay afloat.
Chief Executive Robert Nardelli said the loan will allow the automaker to continue its restructuring and pursue "our vision to build the fuel-efficient, high-quality cars and trucks people want to buy, will enjoy driving and will want to buy again."
The Auburn Hills automaker, which is privately held by Cerberus Capital Management LP, is nearing the minimum level of cash -- $2.5 billion -- it needs to operate, and is fending off parts suppliers and other vendors demanding cash payments on delivery.
"We recognize the magnitude of the effort by the Treasury Department to complete the multiple financial arrangements and appreciate their confidence in Chrysler," Nardelli said. "We would like to thank the many constituents who worked with us to meet the loan requirements. This initial loan will allow the company to continue an orderly restructuring."
On Wednesday, GM received its first $4 billion government loan. The Detroit automaker is to receive another $5.4 billion next month and another $4 billion on Feb. 17, if Congress approves opening the second half of the $700 billion Wall Street rescue fund.
GM and Chrysler must obtain significant cost-saving concessions from the United Auto Workers, suppliers, creditors and other stakeholders by March 31 to show they can be profitable, or the loans could be called back for repayment by the government -- a step likely to force the firms into bankruptcy protection. In exchange for the loans, the federal government will become the owner of a large chunk of both automakers and will have veto power over any transaction over $100 million, among other provisions.
In testimony before Congress in November, Chrysler said it needed $8 billion to fully restructure. Additional money could be approved later if the company meets requirements set out by Congress and legislators approve an additional request for the remaining $4 billion.
Chrysler lost at least $1.08 billion through the first half of 2008. The company burned through $3 billion in cash in the third quarter, leaving it with $6.1 billion at the end of September. It needs $3 billion to operate, Nardelli said in Congressional testimony.
Ford Motor Co. has not sought immediate government aid but has said it would like access to a $9 billion line of credit in case the economy worsens further.