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Chrysler seeks refinancing of government loans

Chrysler Group LLC wants to refinance several billion dollars worth of government loans that are costing it more than $1-billion (U.S.) a year in interest payments, chief executive officer Sergio Marchionne says.

"It's some of the most expensive financing you could possibly obtain," Mr. Marchionne said Friday as he unveiled the auto maker's redesigned large cars, which will be built at the company's Brampton, Ont., assembly plant.

The Canadian, Ontario and U.S. governments bailed the auto maker out last year with loans that are now carrying interest rates ranging between 7 per cent and 20.4 per cent.

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The company owes Ottawa and Ontario about $1.6-billion (U.S.), and owes the U.S. government a further $5.8 billion. Some of the $3.8-billion that the Canadian governments agreed to loan the company in 2009 was never drawn down.

Mr. Marchionne said he wants to repay the loans this year and before an initial public offering of Chrysler's shares.

"What we're trying to line up now is the order within which all these transactions have to happen," he told reporters as the auto maker showed off its new Chrysler 300 and Dodge Charger sedans.

He added that the auto maker will build a new paint shop at the factory, but the timing is uncertain.

"There's no doubt that it needs an overhaul," he said, but when the $400-million investment will happen depends on the overall capital spending program at Chrysler.

He made his comments after being urged by Canadian Auto Workers president Ken Lewenza to make the investment in the Brampton plant, which was running on three shifts before the auto crisis of 2008-2009 and Chrysler's tumble into Chapter 11 bankruptcy protection.

But it's down now to two shifts, which means about 900 workers are on layoff, Mr. Lewenza said.

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"We absolutely need a new paint shop," he said. "If we get a third shift introduced here a paint shop will have to come with it."

Mr. Marchionne put it another way, saying that if Chrysler invests in a paint shop, "the question of the third shift becomes much more urgent."

The 300 is Chrysler's flagship passenger car and the Brampton plant is the second of Chrysler's U.S. and Canadian facilities to receive a major investment to build new vehicles since Fiat SpA took over management control and picked up 20 per cent of the No. 3 Detroit auto maker in 2009.

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About the Author
Auto and Steel Industry Reporter

Greg Keenan has covered the automotive and steel industries for The Globe and Mail since 1995. He also writes about broader manufacturing trends. He is a graduate of the University of Toronto and of the University of Western Ontario School of Journalism. More

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