Fiat May Raise Chrysler Stake To 46 Percent
TURIN - Fiat S.p.A. could raise its stake in Chrysler to 46 percent from 30 percent now by June, two persons with direct knowledge of the matter told Automotive News Europe.
Talks with international investment banks on refinancing Chrysler's debt with the U.S. and Canadian governments are at an advanced stage, paving the way for Fiat to buy a further 16 percent of Chrysler by the end of June, the Italian newspaper Corriere della Sera reported on Thursday.
"This is the real goal Sergio Marchionne is working at," the paper said. "He wants to do it by June. He might be able to do it a bit earlier."
Fiat declined to comment on the report.
A Fiat source told ANE that "it is technically possible" for Fiat to get to 46 percent of Chrysler by June. Whether Fiat raises its Chrysler stake depends on how talks with the banks turn out.
On Monday, Marchionne, who runs both Fiat and Chrysler, said the U.S. automaker would refinance its onerous U.S. and Canadian government debt by June.
Also on Monday, he confirmed that Fiat wanted to get a majority stake in the U.S. group by the end of 2011, but did not elaborate on the steps needed to achieve this goal.
According to Chrysler's April 6 filing with the U.S. Security and Exchange Commission in preparation for an eventual IPO, Chrysler must reduce its debt to the U.S. and Canadian governments to below $4 billion for Fiat to increase its Chrysler stake to 46 percent.
Chrysler currently owes the U.S. and Canadian governments $7.4 billion loaned in June 2009 when the automaker exited bankruptcy protection and Fiat took management control.
Before Fiat can take a majority stake in Chrysler, the U.S. automaker must fully pay off the government loans.
Fiat may pay $1.14 billion to exercise for an additional 16 percent of Chrysler if Marchionne makes the purchase in 2011 and $1.37 billion if he buys it next year, according to JPMorgan Chase & Co. analyst Ranjit Unnithan.
Fiat would also have to renegotiate a so-called 'Incremental Equity Call Option' to buy an additional 16 percent stake in Chrysler. The option currently is set to begin on January 1, 2013 and elapse on June 30, 2016.
Philippe Houchois, head of European auto research at UBS in London said: "There is a lot of flexibility in the contract to achieve control of Chrysler, so Fiat could exercise its 16 percent call option if it reduces the loans to below $4 billion."
It could then wait for the full loan repayment before receiving the last 5 percent stake needed to reach a controlling 51 percent, he said.
More Industry

Penske Auto Group Deal a Record
The deal to take the dealership and transportation services company private sets a new pace for industry buy-sell transactions.
Read More →
War Toll a Damper on Used Auto Prices
Cox Automotive found wholesale depreciation to be elevated in September amid high fuel prices and this year's unusual hurricane season.
Read More →
Bridge the Maintenance Gap
With many drivers missing recommended maintenance, service departments offering transparency and efficiency have a better chance of reaching financially strained consumers.
Read More →
California Store Has New Owner
The longtime dealership in the northern part of the state is known for robust fleet sales and has served the state capital for 115 years.
Read More →
BMW Plant Pursues Cleaner Energy
BMW Group Plant Leipzig has utilized hydrogen to help power its production since 2013, but a new pipeline is planned to take it to another level.
Read More →
Auto Affordability Inches Up
The latest Cox Automotive and Moody’s Analytics index shows a slight increase in new-vehicle affordability despite high prices.
Read More →
Ohio Auto Group Under New Ownership
After 79 years with the Schluter family, Mansfield Auto Group has been acquired by Missouri-based Clement Auto Group.
Read More →
RV Group Expands Carolina Footprint
Blue Compass RV Columbia Northeast is the 13th RV dealership owned by Blue Compass in the Carolinas.
Read More →
Agent Acumen
An Agent Summit panel of people who’ve been supporting auto dealers for years gave both timely and timeless advice for those starting out or mulling the prospect.
Read More →
Missed Maintenance Creates Opportunity
As families get back on the road and into daily school routines, service drives have an opportunity to capture customers who are behind on recommended vehicle maintenance.
Read More →