Fiat Takes Over Majority Control Of Chrysler
Turin, Italy - Fiat will pay $ 500,000,000 for the package of 6% at Chrysler Group's U.S. government. With this move, Fiat Chrysler will increase its participation to 52 percent from 46 percent.
Italian producer will pay $ 500,000,000 U.S. Treasury package.
Sergio Marchionne, CEO of Fiat-Chrysler said the agreement marked the complete exit from the U.S. Treasury as a shareholder of the Chrysler Group.
The announcement made Thursday evening by the Treasury on the sale agreement came on the eve of the scheduled visit of President Barack Obama at a Chrysler factory in Toledo, Ohio.
Obama Administration has invested 12.5 billion U.S. dollars in Chrysler in 2009 as part of a bailout of the auto industry.
In the deal with Fiat, the Treasury will get back 11.2 billion U.S. dollars in principal payments, interest and commitment from Chrysler canceled. It is unlikely to fully recover $ 1.3 billion difference.
Fiat has agreed to pay $ 500,000,000 for the Treasury 98,461 shares of Chrysler.
Before Thursday's announcement, Fiat was 46 percent of Chrysler. If the transaction is completed percentage will rise to 52 percent and thus, Fiat will have majority control, which is one of the targets Marchionne Executive Director for 2011.
Fiat has made an important step toward that goal in the last six months, after last week's repayment of $ 7.6 billion in loans owed to the United States and Canada. On June 10 will celebrate the anniversary of two years to save Chrysler from bankruptcy under the leadership of Fiat.
Earlier this year, Marchionne left open the possibility of a complete merger of two companies with a single site.
This depends on the combined sales increase to 6.6 million vehicles by 2014, an ambitious goal, given that Fiat and Chrysler together sold just over 3.6 million vehicles globally last year.
Max Warburton, a senior analyst at Bernstein Research in London, said: "The previous assumption was that Chrysler will make an initial public offering, but now this seems unlikely and a complete takeover by Fiat Auto it seems more likely."
He said Fiat is moving much faster and more decisively than expected, the rights to the U.S. government to buy shares UAW means that Fiat is actually able to buy the entire company. "
Fiat is expected to receive another package of shares, 5 percent by the end of the year, when Dodge will approve a new model that will consume 5.9 l/100 km, bringing to hold 57 percent of company.
The launch of this model with low fuel consumption is the third of Fiat's performance targets imposed by the U.S. Treasury.
The first was to build an engine with low power consumption. This was achieved in January when Fiat 1.4-liter engine producing MultiAir plant began in Michigan. The second objective was to export Chrysler cars in North America and $ 1.5 billion by the Fiat dealer network in Europe and Latin America. This objective was reached in April.
Each performance objective Fiat has achieved a package of 5 percent of Chrysler in addition to the 20 percent that the Italian automaker has received in June 2009 when the new Chrysler Group was created following the bankruptcy of the old Chrysler.
Auto Workers Association (VEBA), owns 41.5 percent of Chrysler and the Canadian government the remaining 1.5 percent.
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