A growing group of credit unions in the Midwest and South is pledging another $12 billion in low-cost auto loans and joining with Chrysler LLC to offer rebates to lift sagging auto sales. The 2,500 credit unions in 12 states said Tuesday that their members will be eligible for rebates of $500 or $1,000 on nearly all Chrysler, Jeep and Dodge vehicles financed through the unions until June 30.

"Our credit unions are already seeing a surge for loan demand for auto loans in particular," said Dave Adams, president and chief executive of the Michigan Credit Union League. "This just gives them another tool to promote credit union financing."

Last week, about 1,200 credit unions in Michigan, Ohio, Indiana and Illinois set aside $10 billion to finance auto purchases and teamed with General Motors Corp. to offer discounts on GM vehicles.

With Tuesday's announcement, another 1,300 credit unions in Oklahoma, Texas, Kentucky, Arkansas, Tennessee, Louisiana, New Mexico and Mississippi are joining the "Invest In America" program, bringing the total sum pledged to $22 billion.

The Chrysler rebates will be available to 25 million credit union members in all 12 states, Adams said. The GM discounts are still only available to credit union members in the four original Midwestern states, he said.

Adams said the program's intent is both to send the message that auto loans remain available and to prop up sales at domestic manufacturers. "Affordable point-of-purchase financing is critical for auto sales, and credit unions have money to lend," he said in a conference call with reporters.

GM, Chrysler and Ford Motor Co. have been among the hardest hit as vehicle sales have fallen due to the troubled economy and the trouble some customers have had in obtaining financing.

Sales at Chrysler are down 28 percent for the first 11 months of the year. GM sales are down 22 percent for the same period, while Ford volumes are off 20 percent.

"The overall industry is obviously having a big impact on every manufacturer's sales, so we continue to compete as aggressively as we can in that environment," Ed Broadbear, director of incentives and programs at Chrysler, said during the conference call.

Adams said the credit unions are in talks to partner with Ford to offer similar discounts. While the $22 million the credit unions have pledged is available to purchase any vehicle, the unions do not plan to partner with overseas automakers to offer discounts, he said.

"Our focus right now is on providing a much-needed boost for domestic auto companies," Adams said.

Credit unions are different from banks in that they are not-for-profit cooperatives and do not have shareholders. Therefore, they are able to offer loans at lower rates than conventional banks, Adams said, and to customers who might not qualify for loans elsewhere.

Source: http://www.businessweek.com/ap/financialnews/D9540F380.htm