Fiat to buy remaining US stake in Chrysler
The Turin, Italy-based company notified the U.S. Treasury Department that it will exercise an option to buy the government's 6 percent stake. The price will be negotiated within 10 business days, or by around June 10.
It was unclear from Fiat statement's Friday just when the sale would happen. But Fiat is moving quickly to take a controlling stake in Chrysler, which it has run since the company left bankruptcy protection in June of 2009.
Chrysler has made a remarkable turnaround. Before bankruptcy, the automaker was nearly out of cash and needed $10.5 billion in U.S. government money to survive. The company made a first-quarter net profit of $116 million and is forecasting 2011 earnings of $200 million to $500 million. Under the leadership of Fiat CEO Sergio Marchionne, the company has cut costs and revived its sales by refurbishing most of its model lineup of Jeep, Chrysler, Dodge and Ram vehicles.
Buying out the government would give Fiat 52 percent ownership of Chrysler. That's likely to rise to 57 percent before the end of the year when Chrysler begins producing a 40 mpg (17 kpl) small car in the U.S.
Fiat was given a 20 percent stake in Chrysler after the bankruptcy in exchange for management expertise and technology. The Italian automaker has gradually raised its stake by meeting benchmarks set by the government. Last week it paid about $1.3 billion to buy another 16 percent of the company.
On Tuesday, Chrysler repaid a total of $7.6 billion in loans from the U.S. and Canadian governments by refinancing them through a combination of bank loans, bond sales and the investment from Fiat.
Even with the loan repayment, the government has yet to recover about $2 billion of the $10.5 billion in bailout money. Fiat's stock purchase will help some, but the government has conceded it will not recoup all of the money. Some of the cash went to the old Chrysler, which was split off from the new one in the bankruptcy proceedings.
Fiat's could own more than 70 percent of Chrysler if it exercises options to buy part of the stake now held by a United Auto Workers retiree health care trust fund. MSNBC.com