Fiat will invest $1.27 billion to increase its stake in its U.S. ally Chrysler to 46%. The Italians could yet push their holdings to 51% if they meet one last target set as part of Chrysler’s 2009 emergence from bankruptcy.
The latest move not only increases the integration of Fiat and Chrysler, but also sets up the long-discussed initial public offering that would see the Detroit maker return to public trading.
It also helps achieve the goal of Sergio Marchionne, who serves as both Fiat and Chrysler CEO, to create a powerhouse alliance capable of producing 6 million vehicles annually – the level he believes necessary to be competitive in the automotive industry going forward.
“Fiat is ready to take control to bring even greater stability and strength to the relationship in the interests of both,” the executive said from Turin, where Fiat is based.
The latest deal – expected to be completed in the second quarter of this year – will come as Fiat pays off the loans provided by the U.S. and Canadian treasuries to bail out Chrysler two years ago. Marchionne has said he wanted to find alternative funding not only to eliminate government oversight and gain a bigger stake for Fiat, but also because he felt Chrysler was paying too high an interest rate.