Chrysler Pulls Out Of Bid For $3.5 Billion Department Of Energy Loan

Chrysler has decided to pull out of its bid for a $3.5 billion loan from the Department of Energy, one which would have helped the automaker reconfigure its plants to help make more fuel-efficient vehicles, because the restrictions on the loan were too stringent.

In a statement from the automaker on Thursday, Chrysler said it "remains confident in its strategy to bring competitive, fuel-efficient vehicles and technologies to market on schedule."

The Advanced Technology Vehicles Manufacturing Loan Program set aside $25 billion to help automakers revamp assembly plants and invest in fuel-efficient technologies. General Motors also backed out of its bid for $14.4 billion of this type of loan in January 2011.

"The DOE's proposed terms were very restrictive and compliance would have negatively affected our operational flexibility," a Chrysler representative said.

"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," said DOE spokesman Damien LaVera. "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 negotiations between Chrysler and the DOE over the loans have been ongoing for years. The loan program was set up in the fall of 2008 to help the automakers, then on the verge of collapse, find ways to keep developing new technologies.

At the Detroit auto show in January, Chrysler CEO Sergio Marchionne said the company had been debating for months with the DOE over the loans. The government was asking for more collateral to back up the loan and placing too many restrictions on the money, he said. The automaker had originally asked for $7 billion, but cut that number in half to $3.5 billion.

"You start asking yourself, is it worth it?" Marchionne said.

In 2009. Ford received a $5.9 billion loan from DOE through the same program, after asking for $11 billion. Chrysler was looking for the same terms as in the Ford deal but was struggling to convince the DOE, Marchionne said.

Marchionne said the dispute was happening largely because Chrysler is doing better financially. The company was no longer in a crisis mode, and creditors were asking for a bigger piece of the automaker as collateral.

But that also gave Chrysler the ability to walk away, he said.

"This is the same Chrysler that would have taken a buck off the ground three years ago," Marchionne said with a shrug and a smile.

The DOE has only issued five loans under this program: the one to Ford, one to Nissan for $1.4 billion to help it build the all-electric Leaf in Tennessee, another to electric carmaker Fisker Automotive for $529 million and one to electric carmaker Tesla for $469 million. Still another for $50 million went to the Vehicle Production Group LLC, which will make a wheelchair accesible van powered by natural gas.

Comments

[jacobomorales]

12:34 PM on 02/19/2012

Chrysler has always been a low end vehicle. Cheap guzzlers for people who are not very discerning. This company will not survive the competition.

[Kenz300]

12:04 PM on 02/19/2012

The price of oil is going up.

Chrysler needs to get on board the fuel efficiency train or it will go the way of the Hummer.

$4 or $5 gas will have many people parking their gas guzzlers and looking for high mileage vehicles.

[Eagleman]

10:43 PM on 02/18/2012

Someone is thinking right....

[hx4354x0r]

01:23 PM on 02/18/2012

From the CIA World FactBook, 2010-2011 data:

The US owns 1.4% known worldwide conventional oil reserves.
The US makes up 5.1% worldwide population.
The US produces 11.2% worldwide oil supplies.
The US consumes 24.2% worldwide oil production.

This isn't a production problem, it's a consumption problem. Don't confuse years of supply with barrels per day, either. Only the latter makes any real difference.

China and India together have over 7 times the US population. Over the last 10 years, their oil consumption has grown at 10 times the US rate. For the last couple of years now, the global economic crisis has stopped or even reduced worldwide consumption increases. But if you go back to a 10-year average, those growth rates will consume ALL known available and predicted future oil production capacity within the next 25 years.

This data makes no judgments on Chrysler backing out of federal loan deals. I'm personally pleased that they appear not to need federal assistance to address fuel consumption issues.

What the data is intended illustrate, is the need to isolate ourselves from worldwide energy demand, and that "drill baby drill" isn't a realistic approach to that goal. Again, before you quote years of supply, especially in un-conventional resources, study the current and theoretical maximum production rates from these resources. Even with Canadian tar sands oil, barrels per day will fall far short of what we currently use.

Alternative energy AND conservation. We'll need both to survive.

[Kenz300]

12:20 PM on 02/18/2012

The price of oil continues to rise. Rising demand for oil from China and India will soon exceed the worlds ability to supply more raising the price even higher.

Energy efficiency will become more important to consumers when price rise and gas takes a bigger part of the family budget.

In 2008 when gas prices spiked people were parking their gas guzzler trucks and SUV's and were tripping over themselves looking for high mileage vehicles.

Since then GM and Ford have brought out more electric, hybrid, flex-fuel and 40+ MPG gas fueled vehicles and those vehicles are selling.

Chrysler needs to add some fuel efficient vehicles to its fleet or the next time (this summer) gas prices spike they may be sitting in showrooms with no customers.

[Markrsm]

06:16 AM on 02/18/2012

Dear Friends,

Small business can not get credit at any price, I borrowed 500K for six month for working capital and had to pay 300K to borrow it.

But the government has 25B to give to car companies, I love america.

[Reaniel]

10:00 AM on 02/18/2012

Dear Markrsm,

Did you borrow the money while working in Taiwan? Why do you hate America? Why do you outsource jobs?

And please stop lying.

[rodjard]

09:19 PM on 02/17/2012

Something is rotton. All these Automakers do not seem to want
to really compete with one another. Sure they all look diferent,
however they are too much the same for it to be credible.

[rodjard]

09:11 PM on 02/17/2012

Nylon gears in the doors designed and tested to fail on the 1000nth time you
roll the window down. There are too many predictable things that happen with
too many cars for it to be coincidental. Parts are a big business too.

[liltrix]

01:58 PM on 02/17/2012

Without government help and loans Chrysler invents cars like P.T Cruiser, Chrysler Sebring, the Dodge Nitro, the Jeep Liberty, the Dodge Caliber and the Dodge Magnum. And I'm not even going to go into details about all the crap cars they made in the past like the K-Car, the Lebaron etc. While every auto manufacture might have a couple of bad cars every year or every 5 to 10 years, Chrysler has the worst record. What is it with that company? Seriously, do they pick the C and D students out of engineering school or what? They'd do far better with the government loans forcing them to clean up their act.

[Acct Pre Deleted]

12:19 PM on 02/17/2012

The devil is in the details and unfortunately those details were left out of the story.

What restrictions did they find onerous?

[StopMakingSense2]

01:43 PM on 02/17/2012

They had to pay it back! What no corporate welfare? Whaaaaaaaaaaaaaa!

[Ken Maddox]

10:24 AM on 02/18/2012

Probably a bunch stupid government red tape items such as:
Use it to develop fuel efficient vehicles, use it to retool factories to be more energy efficient, and pay it back in a timely fashion.
These things are restrictive for executives like to use the cheap money for items such as:
Remodeling the Executive suites, upgrading the jet, paying executive bonuses, and hiding money in off shore accounts.

[WESmith]

11:47 AM on 02/17/2012

Our government has to keep everything in balance. We The People own most of the oil in the US. But we have to give oil companies subsidies to make it worth their while to produce our oil. The trucking industry uses diesel. Gasoline is the waste product that comes out after making diesel. So, the government needs to keep Americans driving gasoline-powered vehicles so we can subsidize the trucking industry. But, our government can't allow crude oil to rise too high in price because the worth of the US Dollar is inversely proportional to the cost of crude. We The People make a trillion dollars a year in the petroleum business. But if the price of crude goes, the dollar is worth less. Quit a tight rope! Or is it a balloon destined to pop as several other governmental schemes have done lately?

[cosmicdart]

11:59 AM on 02/17/2012

Therefore the Yankee Dollar is tied to the destruction of Earth's ecological balance. Now that isn't keeping everything in balance.

[WESmith]

12:04 PM on 02/17/2012

Now that is hitting the nail on the head. We can't fix Climate Change. It is going to happen. We can't fix the environment. We screwed the pooch decades ago and won't let go.

[cosmicdart]

11:44 AM on 02/17/2012

Since most of the cars and trucks that I see going to and from work everyday only contain one passenger, I think that the DOE would save much more energy investing in the production of a small rugged 60 miles per gallon all weather one passenger commuter car that carries a 40 pound toolbox. It should only cost between 5,000 and 10,000 dollars and have a ten year warranty, a Mickey Mouse car.

[WESmith]

11:56 AM on 02/17/2012

Another option is car pooling. I saved $100,000 over 28 years by car pooling. I invested that money and the value tripled. Now I can afford an energy efficient retirement home on 22 acres with a wind generator and and electric car. All of the lights (LED) in my home run on a single 12V battery and a solar charger from Harbor Freight.
Become energy efficient and SAVE MONEY. Don't religiously expect the government to save you. The government is made up of politicians wanting to keep their jobs. I started car pooling because I couldn't afford to drive by myself. I was $50 above the poverty level at the time. I saw how profitable it was and continued.

[cosmicdart]

12:06 PM on 02/17/2012

Only 1% of commuters would car pool where I live, but most of them would buy a second one passenger work commuter car if it's ruggid enough to take the Wintertime potholes. This car would create millions of jobs for those who build them.

[hx4354x0r]

02:21 PM on 02/18/2012

Great ideas and testimonials! Can I share mine?

I'm a lifelong bicycle commuter, having committed to it when I was still 16. Over 30 years later, I've so far displaced over 150,000 car miles, saved over 10,000 gallons of gas, and saved at least $60,000 in direct equipment and fuel costs, which is reflected in my retirement savings and other assets. I'm still pedaling strong.

I know this can't work for everyone. The good news is, it doesn't have to. Even small shifts towards alternative transportation end up making significant differences. There are lots of people who only live a few miles from work, and could displace at least a few of their car miles with bicycle miles.

The health benefits are delicious icing on the cake, too.

[miner554]

11:08 AM on 02/17/2012

Chrysler products SUCK ! It would be great if they just went away ! But somebody always buys that albatross !

[Acct Pre Deleted]

12:21 PM on 02/17/2012

No they don't. The best vehicles I've owned have been MOPAR.

[RecreationalPilot]

10:35 AM on 02/17/2012

Some of the people here berate GM & Chrysler for taking government loans... these folks scream that, after a few profitable quarters, all money should be paid back when most of it already was.


Then, when the government offers money, they are hesitant to take it, and get chastized.

===

Can you imagine these same folks yelling at them, yet again, for taking another handout?

Yet, these same folks remain quiet when GE gets $7 BILLION a year in taxpayer funded tax relief and dozens of other companies share in over $100 BILLION in tax breaks. Companies that don't need any assistance at all. Yet, these guys scream all day here about a couple of billion which saved a major business sector of the country.

[intolleft]

09:44 AM on 02/18/2012

Most of it? We've been told they are "paid in full". Which is it?

[RecreationalPilot]

09:46 AM on 02/18/2012

That $1.3 Billion wasn't. Not the $3-5 Billion you're spouting. Gee, it took a long time for your BPD to catch up to you and reply.

[tribilin219]

10:26 AM on 02/17/2012

Why is Chrysler not making any electric cars? Is that why their not taking the loan? We bail them out from going under but their still in the pockets of big oil?

[Moose Luck 99]

10:30 AM on 02/17/2012

John Conyers for 20 YEARS got Detroit off the hook on MPG improvements!

[WESmith]

11:26 AM on 02/17/2012

In the 70s, we had electric cars, alternative fuel vehicles, hybrids and Gasohol. No one was interested and millions of Americans lost their jobs.. Since then, People tend to buy foreign vehicles. Millions of more Americans lose their jobs. Big Oil saw the writing on the wall and left the US. Again millions of Americans lost their jobs.
It's a good thing we can blame the evil auto and oil industry for all of our problems. The auto and oil industry supply what we demand. Nothing more, nothing less.