Document Type

Case Study

Case Series

The Rescue of the U.S. Auto Industry

JEL Codes

G01, G28


In late 2008, due to the confluence of the financial crisis and years of structural decline in the auto industry, Chrysler was nearing bankruptcy. The US Treasury provided Chrysler’s owner, Chrysler Holding, with a $4 billion bridge loan and Chrysler’s related finance company, Chrysler Financial, with a $1.5 billion financing program under the Troubled Assets Relief Program (TARP). The government-led restructuring through bankruptcy involved the commitment of roughly $5 billion in debtor-in-possession (DIP) loans from the US Treasury and the Canadian government, under which the US Treasury ultimately lent $1.89 billion, using TARP funds, and Canada lent about $1 billion, proportional to its share of the North American Free Trade Agreement (NAFTA) auto industry. It also involved concessions from stakeholders, corporate governance arrangements for the “New Chrysler,” and a merger with Italian automaker Fiat Automobiles S.p.A. Treasury financed the purchase by the New Chrysler of substantially all of the old Chrysler’s assets with a $7.14 billion loan. The bankruptcy case was controversial and nearly reached the US Supreme Court, but the restructuring ultimately rescued Chrysler. In the Chrysler rescue, Treasury lost about $2.93 billion on an investment of about $10.47 billion.

Date Revised