Posted by: David Welch on January 16, 2009
Here’s the good news for Chrysler. The Treasury Department gave the company’s finance arm, which is owned by Cerberus Capital Management, a cheap loan of $1.5 billion to help it write more car loans. That helps because the company has more cash to lend to car buyers, of course. With banks tight fisting the credit these days, some of the few buyers actually going to showrooms can’t get financed.
But don’t expect it to help much. That $1.5 billion, loaned out to buy cars at an average price of $25,000 each, adds up to additional sales of 60,000 new cars. That’s not much for a company whose sales fell more than 600,000 vehicles last year. Since Chrysler Financial is struggling with the same tight credit markets as everyone else, getting capital for new loans will be tough. Sure, the 60,000 cars that Chrysler can sell will be nice. But unless the lender can find new sources of capital, it’s not much of a windfall. Chrysler Financial CEO Thomas Gilman said in a statement that the government loan will help until new sources of capital open up in the open markets. That’s going to have to happen soon to help Chrysler in any meaningful way.