Fiat to up Chrysler stake for $1.27B

Posted on April 21, 2011

Chrysler after reaching an agreement to repay its loans to the United States and Canadian governments.

The purchase would raise Fiat’s ownership of Chrysler to 46%. Fiat, which owns 30% of Chrysler, effectively gained control of the automaker when it emerged from Chapter 11 bankruptcy in 2009.

“The transaction that we are announcing today … represents a historic step for Fiat and Chrysler and is a source of great satisfaction and pride for both,” Fiat Chairman John Elkann, said in a statement.

Fiat made the announcement after reaching an agreement with Chrysler and its shareholders.

The Turin, Italy automaker said it plans to exercise its right to purchase the additional 16% stake after the repayment of $7.2 billion in loans to the U.S. and Canadian governments occurs during the second quarter of this year.

“This is a fundamental step toward completion of the momentous integration of Fiat and Chrysler, initiated less than 2 years ago, that will result in the creation of a global automaker,” Fiat and Chrysler CEO Sergio Marchionne said in a statement.

Fiat’s share increase – the third in four months – is occurring faster than most expected.

“We have chosen to accelerate the pace to bring about, in the shortest possible time, the birth of a single group capable of fully leveraging the joint development of the respective international activities,” Marchionne said.

The investment by Fiat also brings the company closer to the 51% majority control that Marchionne has said he wants to achieve before issuing a public offering of stock.

Under a 2009 agreement with the U.S. and Canadian governments, Fiat must build a vehicle in the United States capable of achieving 40 m.p.g. before it can raise its ownership another 5%.

By Brent Snavely, Detroit Free Press