Chrysler borrows $4.5 bn to help pay suppliers

5 May 2009

06 May 2009 | Jake Kanter

A US Bankruptcy Court yesterday approved a $4.5 billion (£2.9 billion) loan to Chrysler to support suppliers and allow it to continue business operations.

Media reports in the US said the loan would help the embattled Detroit carmaker pay vendors while its future is decided.

Chrysler filed for Chapter 11 bankruptcy on 30 April at a court in New York.

The company said the loan, funded by the US and Canadian governments, would ensure that it could fund its working capital requirements pending the approval of its sale to Italian firm Fiat.

The arrangement also included the use of $400 million (£264 million) of cash collateral - collected from the sale of liquid assets in bankruptcy.

"While Chrysler is in bankruptcy, a vital source of revenue and credit is missing for these suppliers," said Chrysler CPO Scott Garberding, in court papers seen by the Detroit Free Press.

Chrysler did not respond to supplymanagement.com's request for information about details of how the loan would be used to pay vendors.

Last month Chrysler received a US government loan of $1.5 billion (£993 million) to either guarantee payments to suppliers or speed up time taken to settle invoices (Web news, 15 April).

The US car industry has been struggling during the economic downturn amid plummeting sales.

SMmay2009

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