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Wednesday, July 15, 2009

Chrysler Pays of $1.5 Billion TARP Loan

GMAC Financial Services, formerly Chrysler Financial, has paid off its TARP loan of $1.5 billion.

Chrysler used the loan to provide up to 85,000 consumer loans and said it was paying back the TARP loan in order to avoid higher costs.

This is a step in the right direction as Chrysler is sending a message to the general public that it is on the road to recovery. It is also demonstrating priority in keeping costs down while trying to ensure it does not lose momentum.

Timing is important and Chrysler is setting the right tone by moving quickly. meanwhile, GM is also out of bankruptcy and actually beat Chrysler in terms of time spent re-structuring (40 days vs. 42 days). Speed is critical as delays will only serve to negatively impact public perception.

What is emerging are leaner and more efficient automakers. The question will be whether both automakers can produce cars that consumers want and whether or not they can survive in this highly competitive market.

So far, both have surprised analysts with their speed in restructuring. Let's hope this is a sign of things to come.

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