Chrysler financing arm rejects U.S. aid

Chrysler financing arm rejects U.S. aid

Limits on executive pay said to keep Chrysler Financial from accepting loan.


WASHINGTON (CNN) -- Chrysler Financial turned down additional government funding this month because executives at the financing arm of the troubled auto manufacturer could not agree to new government-mandated limits on executive pay, according to a source familiar with the matter.

An official with Chrysler Financial told CNN that the loan was turned down because the company "has determined that it has adequate private capital funding to cover the short-term needs of our dealers and customers and as such, no additional TARP funding is necessary at this time."

The official also said that company executives "have not been presented with any new demands with regard to executive compensation."

Chrysler Financial - which is separate from automaker Chrysler LLC but has the same majority owner, Cerberus Capital Management - already borrowed $1.5 billion from the Treasury under the Troubled Asset Relief Program, or TARP, but those loans were made under less strict regulations pertaining to executive compensation.

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The Washington Post, which first reported the story online Monday, said the amount of the loan Chrysler Financial rejected was $750 million.

A Treasury Department spokesman declined to confirm the loan rejection, but told CNN that the administration's Auto Task Force continues to monitor the financing situations for Chrysler Financial and General Motors (GM, Fortune 500).

"This is an issue that Chrysler and its stakeholders will need to address as part of this process," the spokesman said.

Chrysler LLC has until the end of this month to reach a deal, most likely with Italian carmaker Fiat, to maintain U.S. government financial aid and avoid a bankruptcy filing.

CNN