Patrick Rall's picture

Fiat plans to buy last 6.6% of Chrysler from US govt

When Fiat SpA paid off $7.6 billion dollars in debt to the US and Canadian governments this week, they effectively raised their ownership of the Chrysler Group to 46%, leaving the US government to own 6.6% while the Canadians now hold 1.7%; but according to a statement filed to the US Treasury department Fiat plans to purchase the 6.6% held by the US government before the end of 2011.
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The value of that 6.6% stake in Chrysler will be decided based on a negotiation between Fiat and the Us Treasury, but if the two cannot come to an agreed upon price the purchase price of that 6.6% will be determined by a third part evaluation. Once Fiat has purchased that 6.6%, it will own 52.6% with another 5% coming from the US government based on the third and final requirement stated at the time of the Fiat-Chrysler merger. Once the Chrysler Group offers a vehicle that yields at least 40mpg utilizing Fiat technology, the company will reach the final requirement and Fiat will get their final “free” chunk of Chrysler – bringing their total ownership to 57.6%.

Fiat and Chrysler CEO Sergio Marchionne had planned to have Fiat controlling at least 51% by the end of 2011 and now that they have paid off the remainder of the massive bailout loans, the Italian automaker has a clear path to their majority stake in Chrysler. Once Fiat has reached their majority stake in Chrysler, we can expect to see the Chrysler Initial Public Offering (IPO) followed, with the exact timing being based on the value of the company and the need for cash.

The United Auto Workers retiree trust currently holds a large stake in the Chrysler Group but reports have indicated that Fiat could also purchase a portion of the Chrysler ownership from the UAW, which would raise their total ownership to roughly 76%. Fiat has offered no plans to purchase the final 1.7% held by the Canadian government but as the Italian company works to get their new branch out from under governmental control, it would make sense for Fiat to attempt to acquire the last of the Canadian government’s stake in Chrysler.

Source: Automotive News

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