WASHINGTON (Reuters) - The U.S. Treasury said on Friday it will lend Chrysler LLC's finance arm $1.5 billion to help it make new car loans as part of a broader program to revive the sputtering domestic auto industry.
The Treasury said it will make the five-year loan from its $700 billion financial bailout fund to a special unit created by Chrysler Financial at an interest rate one percentage point above the London interbank offered rate (LIBOR) for the first year, then rising to 1.5 percentage points above LIBOR.
The Treasury earlier extended a $4 billion loan to Chrysler for its automotive operations and had granted $13.4 billion in operating loans to General Motors Corp
Treasury last month invested $6 billion to support activities of GMAC, the financing arm affiliated with GM.
The government is bolstering the finance companies to spur auto loans to consumers, whose purchasing power has been eroded by the credit crunch and recession. Most car buyers finance their auto purchases.
Chrysler is considered the weakest of the Detroit manufacturers and analysts have questioned whether it can survive without a merger partner,
Chrysler Vice Chairman Tom LaSorda said earlier this week he could not say whether Chrysler's owner, private equity firm Cerberus Capital Management, was shopping the automaker to potential buyers at a time when auto sales are plunging.
A Reuters report on Tuesday, citing people with knowledge of the talks, said Chrysler had discussed selling assets to Renault-Nissan
(Reporting by David Lawder; Editing by Tom Hals)