WASHINGTON -- As Chrysler LLC and Fiat Group pursue a global partnership, the automakers are walking a fine line in the U.S. capital.
Chrysler needs federal loans to keep operating, company officials say. But giving U.S. taxpayer money to an automaker tied to an overseas-based company will raise red flags, officials here concede.
But Chrysler spokesman Dave Elshoff said today the companys agreement with Fiat is consistent with the terms of the U.S. Treasury Department loan -- its stipulations and our obligations.
In announcing their planned partnership Tuesday, the two automakers said Fiat would provide management services supporting Chryslers submission of a viability plan to the U.S. Treasury, as required. Fiat plans to take a 35 percent stake in Chrysler.
Chrysler received a $4 billion federal loan on Jan. 2. Last week, the Treasury Department announced it would provide $1.5 billion in aid to the automakers captive finance company, Chrysler Financial. Chrysler LLC wants an additional $3 billion in federal aid to keep operating.
Chrysler is required to win that additional funding as a condition to the Fiat arrangement, several news outlets reported today.
When asked whether Chrysler needed the $3 billion for the Fiat deal to go through, Chrysler Executive Vice President Frank Klegon told reporters today:
"I think that is part of the deal... That is part of the process, the expectation is that that
is an important part of it."
Chrysler officials have insisted that they never asked for the federal funds in chunks. They sought the full $7 billion when they submitted their loan request to the Senate Banking Committee in early December.
Chrysler and General Motors are required by federal loan agreements to submit restructuring plans by Feb. 17. Those plans are supposed to show how they intend to be viable for the long term.
A so-called car czar designated by President Barack Obama is to decide by March 31 whether the restructuring plans are credible. Otherwise, the loans could be recalled, possibly forcing the companies into bankruptcy.
The outgoing Bush administration set the loan terms.Obama has not indicated whether he intends to change them.