Struggling to fund its turnaround, expand operations to healthier, emerging markets, and reshape its truck-heavy lineup, Chrysler LLC pulled $2 billion in loans this week, money funded in part by its one-time German partner, Daimler AG.
Chrysler is by no means the only one of the Big Three hurting for cash at a time when the domestic market's plunge is hurting cash flow. But the cost of borrowing could go up as ratings agencies such as S&P consider further downgrading the debt of the troubled manufacturers.
Chrysler's move was not only anticipated, but actually required by the terms of its 2007 sale, and marks the approach of the first anniversary of its acquisition by the private equity giant, Cerberus Capital Management. Of the total, $1.5 billion was provided by Daimler, the other by Cerberus, with the total loan due in 2014.
While analysts expressed concern about adding to Chrysler's mounting debt burden, they added that it does provide the automaker with some much-needed cash to address its ongoing restructuring program. Among other things, Chrysler could use some of the money to help develop crossovers and passenger cars to replace its faltering lineup of pickups, minivans, and SUVs.