Chrysler Cranks Up Its Credit Line

Chrysler Cranks Up Its Credit Line

There may be a nationwide credit crunch, but it apparently doesn't apply to distressed Detroit automakers. General Motors Corp. is circling the banks, Ford Motor Co. is chewing away at the $18 billion it got in late 2006 for mortgaging just about everything the company owns, and this week privately owned Chrysler LLC said it's hitting up the lenders for a hefty $24 billion on its credit lines.

Detroit's rush to credit comes despite GM's insistence it has $24 billion in cash and Chrysler's admonition the company made $1.1 billion in the first half of this year.

Chrysler said the $24-billion tap on its credit lines "will help us to support our dealers and their retail customers," in a published quote from Tom Gilman, executive vice president of Chrysler Financial.

The dough may also come in handy for what seems an inevitable infusion required at Chrysler Financial to make up shortfalls in residual values for leased pickup trucks and SUVs, which comprise a heavy portion of Chrysler's sales portfolio.

Chrysler is hardly alone under the looming cloud of pending lease obligations, as the value of pre-owned pickups and SUVs has plummeted in the last year, hammered by the high gasoline prices that have beat down consumers' once almost insatiable demand for powerful, large trucks.

Starting this month, Chrysler Financial is foregoing leasing altogether, as the company and dealers concentrate on creative methods to finance full-purchase transactions. As of August 1, the General Motors Acceptance Corp. finance arm of GM suspended leasing in Canada; the unit reported a second-quarter loss of nearly $2.5 billion, prompting speculation that GMAC, too, may effectively suspend incentivized leasing in the U.S. market as well. GM Chairman and CEO Rick Wagoner only would say the company planned to keep leasing available in August.

Ford Motor Credit reported a leasing-related loss of some $1.8 billion in the second quarter, saying it would continue with leasing, although it is likely the company will markedly reduce the amount it subsidizes for leases of pickups and SUVs, effectively making leasing non-competitive with straight purchase deals with low-interest financing or large cash rebates.

Bill Visnic:  is an AutoObserver Senior Editor. Follow @AutoObserver on Twitter