Fiat to boost Chrysler stake within 2 months
BOLOGNA, April 8 — Fiat SpA is poised to lift its stake in Chrysler to 30 per cent within the next two months, bringing Fiat another step closer to gaining majority control of the US automaker.
Sergio Marchionne, the chief executive of both Fiat and Chrysler, has said that one of his main goals this year is for Fiat to gain a majority share in Chrysler, which went through a US government-funded bankruptcy in 2009.
Speaking to reporters in Italy yesterday, Marchionne said Fiat could boost its stake in Chrysler in the next 30 to 60 days. He added that he would prefer Fiat obtain a majority share ahead of Chrysler’s planned initial public offering.
“It would be wise to wait till we were at 51 per cent before proceeding with the IPO,” Marchionne told reporters.
Fiat was given management control and a 20 per cent stake in Chrysler’s 2009 bailout deal. Under that arrangement, Fiat can raise its stake in Chrysler to 35 per cent if it meets three tests designed to put the US automaker on firmer financial footing. Fiat then has an option to buy an additional 16 per cent.
Chrysler met the first test to develop a more fuel-efficient engine in January, giving Fiat a 25 per cent stake in the company.
The US automaker must also reach certain international sales and distribution targets. To cross that hurdle, Fiat must sell Chrysler cars and trucks through 90 per cent of its dealers in Latin America.
Franchise laws in Brazil have posed a problem, but Chrysler is nearing a solution to that, which involves selling its products under the Fiat brand in Latin America, said Michael Manley, head of Chrysler’s international operations.
“For me, the most important thing is to achieve the expansion that we wanted to achieve in the marketplace, whether it’s products that are branded with Fiat or whether it’s our own products,” Manley told reporters at Chrysler’s Auburn Hills, Michigan, headquarters yesterday.
However, when Marchionne was asked whether Chrysler cars would be sold as Fiats in Brazil, he said “no.” Representatives for Fiat and Chrysler could not immediately clarify the executives’ comments.
Brazil is a particularly strong spot for Fiat and it vies with Volkswagen AG as the market leader in the country. Marchionne said yesterday he expects Brazilian auto sales to be well above four million by 2014.
A WAY TO THE IPO
Chrysler should be able to meet all three milestones before the end of 2011, paving the way for Fiat to exercise an option to obtain a majority stake, Marchionne said.
Previously, Marchionne had said Chrysler could go public in the second half of 2011.
In recent weeks, he has said the timing of an IPO was reliant on the needs of the company and its majority stakeholder, the health care trust affiliated with the United Auto Workers known as the VEBA.
“It depends on the interests of VEBA, how much they are interested in cashing in,” Marchionne said yesterday. “It depends on the needs of the group.” — Reuters