Sergio Marchionne's patience paid off as the Fiat and the UAW reach a deal for the union's stake in Chrysler.
After months of speculation about when — or if — the deal would be done, it is: Fiat SpA and the UAW have reached an unexpected New Year’s Day agreement for the automaker to buy the union’s remaining stake in once-bankrupt Chrysler Group for $3.65 billion up front, plus an additional $700 million after the deal closes.
Fiat acquires the remaining 41.46% from the union’s health care trust and is expected to complete the acquisition, a key goal of CEO Sergio Marchionne, by Jan. 20. The Italian automaker will pay $1.75 billion from its own bank account, while Chrysler will pay $1.9 billion. Chrysler also agreed to pay the VEBA an additional $700 million in in four $175 million annual installments after the deal is done.
The two parties had been viewed as being far apart on the purchase price for the stake — which could have scuttled the long-planned takeover by the Italian maker. The UAW had repeatedly suggested it wanted more than $5 billion while Fiat and Chrysler CEO Marchionne said he wouldn’t pay it. In fact, at one point last autumn, Marchionne began dropping hints that Fiat might consider severing its ties with the U.S. maker entirely. However, the two parties continued to quietly search for mutual ground.
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“Clearly it’s a victory for Marchionne,” said Stephanie Brinley, analyst with IHS Automotive. “It took a lot of time and a lot of energy. It’s time well spent. More importantly, it’s resolved. They’ve eliminated the uncertainty in terms of who owns who.” (more…)