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Fiat set to grab 51 per cent of Chrysler

Sun, 17 Apr 2011

Sergio Marchionne wants majority at Chrysler

What a difference a couple of years makes.

On May Day in 2009 we reported that Chrysler had been put in to Chapter 11 Bankruptcy and the US Government was stepping in to ease the pain with $7.5 billion (admittedly at somewhat less than mates-rates) and that the management were ‘leaving the building’.

Step forward Fiat to take up a 20% stake in Chrysler and Fiat boss, Sergio Marchionne, who planned to lead Chrysler away from the dark side and in to the light, with the promise of smaller and more efficient platforms and engines.

Fiat were promised they could up their stake to 35% if they fulfilled three criteria: They must provide Chrysler with access to its global distribution network to allow Chrysler to be a viable car exporter. They must provide a car platform capable of achieving 40mpg to be produced in the US, and they must produce a fuel efficient engine ‘family’ for use in Chrysler vehicles to be manufactured in the US.

So far, they’ve hit two out of three and they’ll have all three nailed down by the end of 2011. That will mean Fiat then owns 35% of Chrysler, but it seems Sergio Marchionne wants control.

Plans are afoot now Chrysler is buzzing to repay the expensive US Government loans, which are costing Fiat/Chrysler $1.23 billion a year in interest (yep, it’s worse than a loan from Ocean Finance), and replace them with loans and bonds from the market.

As soon as that is done Fiat plans to grab an additional 16% of Chrysler stock for around $1.5 billion which will mean, once the third condition is met later this year – with the extra 5% of Chrsler as a result – Fiat will own 51% of Chrysler.

Watch this space.

By Cars UK