Patrick Rall's picture

Fiat could increase ownership of Chrysler to 46% by June

Chrysler and Fiat Sergio Marchionne has stated since shortly after the merger of the two companies that he wanted for Fiat to own 51% of the Chrysler Group by the end of 2011 and while there has been some speculation as to when that number will be reached, Fiat could own 46% of Chrysler as soon as June.
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When Fiat took control of the Chrysler Group, they began with 20% with the chance to increase that number to 35% by reaching a handful of performance requirements. After that, Fiat would have to purchase the additional 16% needed to own 51% of the Chrysler Group, which will cost the Italian company 1.14 billion if they pull the trigger in 2011 and 1.36 million if they wait until 2012.

As Fiat and Chrysler have worked together to meet the various requirements, it has been assumed that Fiat would work its way up to 35% by meeting the US government’s requirements, then buying the additional 16% needed to reach 51%. However, according to the Automotive News, Fiat has been working with banks to refinance their loans to make the additional purchase of Chrysler ownership and if the talks between these lending institutes and CEO Marchionne pan out, Fiat could make the buy of the 16% of Chrysler this summer.

The decision to make this purchase as soon as possible likely comes from their desire to save the $210,000 in interest that they would incur by waiting until next year. The final 5% from the government is dependent on the company building a vehicle in the US that gets 40mpg based on Fiat technology but with nothing seemingly coming within the year, it looks like Chrysler will save that 5% for after they make the big purchase of the additional 16%.

Again, this all depends on Marchionne’s ability to get refinancing on current loans before they can make the big purchase of Chrysler ownership but from the sound of things – Fiat could be much closer to being a majority owner of the Chrysler Group by the end of 2011.

Source: Automotive News

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