The American automaker Chrysler Corporation is looking to reduce the interest rate on $2.9 billion credit and wants to get a new rate to pay the huge debt they have; this action has been taken twice this year and this information has been given by unidentified person that is knowledgeable in the process of this transaction. This has created controversy in the financial market and because of these practices there have been warnings issued by the Federal Reserve of the United States regarding this issue which has become well known in the financial world.
A proposition with the new rate was issued on December 9. There has been a reduction of rates on more than $200 billion of speculative type loans during 2013; this has increased by more than 200% since 2012 according to financial sources. This money was given to Chrysler in 2011 to help pay almost $8 billion that was given in 2009 by the American and Canadian governments to avoid the debacle of the car sale company. Chrysler might be able lower the rate on the borrowed money to less than 3 percent, currently it sits at 3.25 percent. The Michigan based company is on a tough situation and it could explore different options like focus on the automobile export arena in the middle east which is a booming market and economy for luxury and used cars, in places in the middle east like Dubai and Abu Dhabi car market business which can be a good opportunity .
Regulatory Warnings
The Federal office asked some of the most sizable banks to desist of creating loans that can cause controversy and can generate financial problems with huge losses. That may result in a loss. The regulatory system encountered 42% clouted loans in 2013. Chrysler is backed up by the Italian company Fiat Spa which give them credibility and a hope for paying their debt and getting back in the market with new strategies.
Strategic Partner
Chrysler’s future may be uncertain, but it has a trajectory of great moments since their start, the company is recognized in the automobile industry having failures and great achievements, but some bad business strategies and sudden changes in management key decisions led them to a compromising financial situation. For Chrysler to borrow money from the government, they have to offer a long term plan and find strategic allies. Fiat was in need to explore a new market for selling cars and explore car export to the USA and found a business partner based in America. Fiat was able to use Chrysler operation and gave the company a fuel effective car technology to offer more economic cars and save create new jobs in America and save the company.
The current situation can increase car prices to increase sales numbers, the marketing strategies have been better now and explore new markets and a number of Chrysler vehicles have been shipping from dealerships, and that has given hope to the company.
