Fiat to Boost Stake in Chrysler to 65 Percent; Increase of 3.3 Percent

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Think of it as a layaway plan: Fiat SpA, currently the majority stakeholder in the Chrysler Group, continued its long plans for a merger by planning to buy another 3.3 percent stake in the American automaker, raising its total to 65 percent.

It's been almost two and a half years since Fiat began its tie-up with Chrysler, securing a 20 percent stake in the automaker. Fiat promptly completed three "performance milestones," each allowing Fiat to boost its stake by five percent: the first was to make a fuel-efficient I-4 engine in the U.S. (the 1.4-liter MultiAir); the second was to boost sales outside of the NAFTA region; and the third was to engineer and produce a 40-mpg car in the United States based on Fiat platforms, which was satisfied by the 41-mpg Dart Aero. Fiat purchased another 16 percent of Chrysler in May 2011, boosting its stake to 46 percent. By the end of 2011 the stake had increased to 58.5 percent thanks to Chrysler's buyout of the American and Canadian governments' holdings.

In July of last year Fiat indicated it would purchase an additional 3.3 percent from the Chrysler Voluntary Employee Beneficiary Association at a cost of $342 million (the amount is being contested in court after Fiat and the VEBA, controlled by the United Auto Workers, used different calculation methods to determine the stake's price). Today, Fiat indicated it would do the same thing--purchase another 3.3 percent from the UAW VEBA. Bloomberg reports that the stake's price was calculated differently this time than the last, which means Fiat will pay just $198 million for it. When all is said and done, Fiat will own 65 percent of Chrysler, and the UAW VEBA will hold the remaining 35 percent.

What's next? That depends on Europe, strangely enough. Fiat CEO Sergio Marchionne reportedly said that the Fiat-Chrysler takeover plan (which Marchionne curiously calls "a merger") could be slowed down by decreasing profits and lagging sales in Europe. Take Europe out of the equation for a moment and Fiat's plans remain the same: Marchionne and the Turin, Italy-based automaker are likely going for a 100-percent stake.

Source: Bloomberg

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