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Chrysler’s first-quarter sales jumped 23 per cent in the U.S. and 8.5 per cent in Canada.


Chrysler Group LLC, the Detroit auto maker whose life-and-death struggles are a fixture of almost every North American recession, will take another major step forward Tuesday in the recovery from its latest and most grave crisis.

The third-largest Detroit auto maker, cleansed by a trip through Chapter 11 bankruptcy protection, saved by a ruling by U.S. President Barack Obama and fortified by a marriage with Fiat SpA, will repay $7.5-billion (U.S.) in loans to the Canadian, Ontario and U.S. governments.

The move comes a little more than two years after Chrysler entered Chapter 11 protection, eliminated tens of billions of dollars in debt and secured about $15.8-billion in bailout backing from the three governments.

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"It's a real win-win," Chrysler Canada Inc. president Reid Bigland said Monday. "Chrysler Canada and its 9,000 employees received a new lease on life and the governments received a nice return on their investment."

Chrysler's rebound - and that of its larger crosstown rival General Motors Co. - marks a milestone in the recovery of the North American economy from the Great Recession of 2008-2009, which threatened to deepen into a depression unless the governments stepped in to halt the total collapse of the Detroit-based auto industry.

The federal and Ontario governments will receive about $1.7-billion and the U.S. Treasury about $5.8-billion. Ottawa and Ontario provided about $3.8-billion to Chrysler when it went into Chapter 11 in 2009.

About $550-million of that money was not drawn down, leaving taxpayers out of pocket for about $1.45-billion that the two governments will try to make up by selling their stake of about 2 per cent in Chrysler when its shares begin trading, an event expected next year.

The auto maker and its employees are grateful for the support the taxpayers gave them, Mr. Bigland said.

As part of the bailout, which was also made possible by concessions from the Canadian Auto Workers union and its members at Chrysler Canada plants in Toronto, Brampton, Ont., and Windsor, Ont., the company agreed to maintain 20 per cent of its North American production in Canada.

As it recovered, Chrysler has invested about $1.5-billion at those plants, Mr. Bigland said. The biggest investment was about $1-billion to retool the Brampton plant to build a new generation of the company's flagship full-sized cars, the Chrysler 300 and Dodge Charger.

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A $27-million investment in the Toronto factory, the Etobicoke Casting Plant, has secured the future of a facility that was scheduled to close.

The loan repayment became possible when Chrysler raised $6.2-billion in debt and a $1.3-billion credit facility last week.

About $3.2-billion worth of notes bearing 8 per cent and 8.25 per cent annually and the term loan and line of credit at 4.75 per cent over the London-Interbank Offered Rate, will drastically reduce the company's interest costs.

Sergio Marchionne, chief executive officer of Chrysler and Fiat, who engineered the deal that gave Fiat management control of Chrysler initially and a 51-per-cent stake in the company as of Tuesday, said $1.2-billion worth in interest costs kept Chrysler from turning a profit last year.

Chrysler's future seemed so bleak in 2009 that the federal government insisted on a 20.57-per-cent interest rate on one of its loans.

Since emerging from Chapter 11 protection, Chrysler's sales have bounced back in Canada. It has returned to third spot in the Canadian sales rankings and at times - including last month - has surpassed General Motors of Canada Ltd. for second spot behind Ford Motor Co. of Canada Ltd.

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Chrysler's U.S. sales rose 23 per cent in the first four months of 2011 from year-earlier levels. The sales gains in both countries contributed to the company's first profit since it came out of bankruptcy protection. Chrysler posted a profit of $116-million in the first quarter, compared with a loss of $197-million a year earlier.

Revenue rose to $13.1-billion from $9.7-billion.

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