Benchmarks Would Allow Fiat to Increase Chrysler Stake

As uncertainty over the future of Detroit’s smallest automaker grows, new details concerning the potential tie-up with Fiat that could save it are emerging.

According to “a person familiar with the Fiat-Chrysler negotiations,” Fiat would take an initial 20 percent stake in Chrysler, and would be able to increase that stake to as much as 35 percent by meeting specific benchmarks. Each milestone achieved through the partnership would allow Fiat to hold another 5 percent of Chrysler.

When the first Fiat engine is certified for use in the U.S., when U.S. production of the first Fiat-based Chrysler vehicle begins, and when the first U.S.-built vehicle based on Fiat technologies is exported, Fiat would be able to increase its stake to 25, 30, and finally 35 percent.

Initially, Chrysler and Fiat had planned for the Italian automaker to acquire 35 percent outright, with the option of increasing to 55 percent at a later date. The Presidential Task Force on Autos vetoed that plan, stating that Fiat would need to reduce its stake in order for the Obama administration to approve the partnership. The task force also said that Fiat would not be able to claim a majority stake in Chrysler until the U.S. automaker repaid its government debts.

Chrysler is slated to receive Fiat’s small-car platforms and engines, if the deal can be finalized, while Fiat will get access to Chrysler’s dealership network in the U.S. The companies have until April 29 to iron out the details of their proposal, under a timeline imposed by the Obama administration.

Source: Automotive News