Fiat Increases Stake In Chrysler, Merger On The Horizon

Fiat has increased its stake in American carmaker Chrysler to 53.5 percent this week, after buying the remaining six percent holding held by the US Treasury and the Canadian Government as part of Chrysler's bankruptcy bail-out.

The deal, valued at around US$710 million, makes Fiat the majority owner of Chrysler. The US Treasury and Canada originally held between them 10 percent of Chrysler as part of the original US$12.5 billion bail-out in bankruptcy funding, most of which has been repaid. 

Fiat will also pay the Canadian Government $150 million for its 1.7 percent stake in Chrysler.

Around $11.2 billion of the US Treasury loans have been repaid - six years earlier than expected - and around $2 billion of the Canadian Government's $2.9 billion loan has been repaid. The remaining amount is expected to be written off.

Agreed as part of Fiat's original 20 percent acquisition of Chrysler was that Fiat could not take a majority position until all US Treasury loans had been repaid.

Fiat expects to boost its stake to 58.5 percent by the end of 2011. A full merger is expected to be finalised in the coming year, depending on negotiations with VEBA - the United Auto Works union trust fund - which took 41.5 percent of Chrysler during the company's bankruptcy.

Together, Fiat and Chrysler are targeting combined revenue of 100 billion euros by 2014 - with much of it to come from Chrysler vehicle sales.

In the three months to June, the Fiat brand is expected to have contributed 175 million euros to the company's revenue - compared to 155 million euros for Chrysler in June alone.