Chrysler repays $7.5 billion to U.S. government

With the announcement today that Chrysler will repay its $7.5 billion bailout loan it received from the U.S. government, the auto bailout has reached another milestone.

To get out of its credit fix, Chrysler has lined up loans of $4.3 billion and will issue $3.2 billion in bonds. Italy’s Fiat, which controls Chrysler, will kick in $1.3 billion and get 46% ownership.

Private money has stepped up, thus validating the approach taken by the Obama administration. It’s also a significant victory for all the employees at Chrysler who worked through this difficult period and came out with new versions of vehicles like the Dodge Charger pictured above and the new Chrysler 200.


GM plans huge investment in U.S. auto plants

The U.S. auto business continues its spectacular rebound from its near-death experience. Sure, there’s a long way to go, but this is excellent news and shows a commitment to invest in America.

Growing demand for General Motors Co. cars and trucks is pushing the Detroit automaker to add thousands of jobs and spend $2 billion to upgrade plants across the country.

GM CEO Daniel Akerson confirmed Tuesday that the company will create or preserve more than 4,000 jobs in eight states by investing heavily in 17 facilities nationwide. So far, the company has only announced millions of dollars in upgrades at plants in Toledo and Bowling Green, Ky. It is expected to release specifics about other plants during the next few months.

While much of the planned spending hinges on winning state and local tax incentives, the company says it needs to boost production and resume hiring to meet rising consumer demand.

The U.S. economy and job market needs a boost like this. Hopefully this will continue.


AutoNation expands share buyback

The domestic auto industry is doing very well, and that’s reflected in the news coming from AutoNation:

AutoNation Inc. (NYSE: AN – News) announced that its board of directors has authorized the repurchase of up to an additional $250 million of common stock under its existing share buyback program. This has increased the total authorized amount under the program to $395.9 million.

Last year, the automotive retailer had increased the authorization amount during May and July by $250 million each. In the first quarter of 2011, the company repurchased 1.8 million shares at an aggregate price of $58.8 million, reflecting an average price of $32.60.

During the quarter, AutoNation reported a rise in profit to $70.3 million or 46 cents per share from $58.8 million or 34 cents in the year-ago period driven by strong new and used vehicle sales. The profit exceeded the Zacks Consensus Estimate by 3 cents per share.

This is excellent news for the economy, and hopefully we’ll see gas prices start to decrease, giving Americans more disposable income.


White House takes credit for GM resurgence

General Motors had a very successful IPO last week, and the Obama administration is taking justified credit for bailing out GM instead of letting it die in a forced liquidation in bankruptcy.

It’s hard to argue here with success. The administration took a huge amount of grief for this decision, and it clearly hurt the President and the Democrats in the midterms, but this was the right decision. The auto industry is thriving, and we avoided a death spiral in the auto industry and the supplier base that would have occurred under a forced liquidation.


President Obama touts the auto bailout in visit to Ford plant

CHICAGO - AUGUST 5: U.S. President Barack Obama (3rd L) looks at the new Ford Explorer while touring the Ford Motor Company Chicago Assembly Plant August 5, 2010 in Chicago, Illinois. According to reports, Ford said the plant will add 1.200 new jobs made possible by a Dept. of Energy loan that is intended to help companies retool to make fuel-efficient vehicles. (Photo by Jeff Haynes/Getty Images)

The bailouts last year of GM and Chrysler were very controversial. Ford didn’t get a bailout, but the company urged the government to bail out its competitors, arguing that it was critical to keep the domestic supplier base for the auto industry in place. Without it, many suppliers would have gone bankrupt, and millions would have lost their jobs.

More than one year later, the US auto industry is thriving, and President Obama has been touring auto factories to drive that point home. Today he stopped at a Ford Motor Company Chicago Assembly Plant in his home town of Chicago, Illinois, checking out the new Ford Explorer. According to reports, Ford said the plant will add 1.200 new jobs made possible by a Dept. of Energy loan that is intended to help companies retool to make fuel-efficient vehicles.

The bailout is still a source of political conflict.

On Thursday, Republicans criticized Mr. Obama’s visit here because, unlike G.M. or Chrysler, Ford turned itself around without taking a federal bailout. “Desperate To Claim Economic Victory, Obama Visits Ford Plant To Tout Success He Had Nothing To Do With,” read the headline on a statement from the Republican National Committee.

White House officials countered that Ford benefited from the industry bailout even though it did not accept aid itself, because the federal money kept a network of suppliers in business. They also pointed to the industrywide boost from the government’s cash-for-clunkers program, which used tax credits to encourage consumers to trade in older, more polluting cars for new models last year.

Moreover, officials noted that Ford used a $400 million loan from the Energy Department to retool the plant Mr. Obama visited on Thursday, which now builds an energy-efficient line of Explorers. And Mr. Obama arrived with more help for Ford — a $250 million loan guarantee from the Export-Import Bank to finance the export of 200,000 vehicles to Canada and Mexico.

The article also points out that “the auto industry added 55,000 jobs over the last year, the first net gain in a decade, and its exports were up 57 percent in the first four months of the year.”

The success seems apparent, but we have a toxic political environment and it’s an election year, so you can expect to see plenty of arguments on this point.


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