History repeated as Chrysler makes a big comeback

Article by Christian Andrei, on May 29, 2011

Chrysler’s repayment of $7.6 billion in loans to the U.S. and Canadian governments gives an extra boost to the administration of President Barack Obama who lists the bailouts as a successful domestic policy.

Using private money, Chrysler was able to fully repay the loan six years before they were due. This isn’t the first time that Chrysler was able to pull off such a feat. In 1983, Chrysler was recovering from having entered a virtual bankruptcy three years earlier.

But on that year, it repaid $1.2 billion in government-guaranteed loans seven years before they were due. It’s uncertain whether taxpayers in the U.S. and Canada would be able to recover their full investment since it can’t be predicted what the value of their stock in Chrysler would be.

If the Obama administration had not insisted on bailing out the automakers, the situation would have been much worse. In addition, the auto bailout may serve as a template for handling the budget deficit and entitlement reform.

It should be noted though that with the government’s decision to rescue Chrysler and GM, the sacrifices were shared by the employees, managers, dealers, bondholders, shareholders, and taxpayers.

It was not completely voluntary but apparently, it was an effective plan. Now, the question is if what took place in 1983 will be repeated.

Several months after the loans were repaid in 1983, Chrysler launched its innovative new minivan, which was such an amazing vehicle that even Car and Driver magazine made a recommendation to purchase the carmaker’s stock.

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