Fiat exercised option to buy 3.3% stake in Chrysler

Article by Christian Andrei, on July 9, 2013

Fiat has exercised an option to increase its holdings in Chrysler Group by 3.3 percent. For those who don't know, the Italian manufacturer has been exercising options since mid-2012 to acquire stakes of around 3.3 percent from the Voluntary Employees' Beneficiary Association (VEBA), a health trust fund for Chrysler's retirees. Including the most-recent action, Fiat has already exercised three of its six-monthly options, allowing it to raise its holdings in Chrysler to 68.49 percent.

Fiat chief executive Sergio Marchionne is making step-by-step purchases of Chrysler stake that would eventually allow the Italian carmaker to take full control of its US subsidiary. This would pave way for Marchionne to merge Fiat and Chrysler to create a company that is large enough to compete against leaders Toyota, General Motors and Volkswagen.

This would also allow Fiat to gain access to some of Chrysler's cash for investments in new models. Chrysler has become Fiat's main source of profit as it is still trying hard to end its losses in Europe, which reached EUR704 million ($903 million) in 2012.

Group net income, including minority holdings, reached EUR1.41 billion in 2012. If not for Chrysler, Fiat would have posted losses of over EUR1 billion. Marchionne said that Fiat has yet to reach an agreement with the VEBA on the acquisition of its remaining stake in Chrysler. He remarked jokingly that if VEBA accept Fiat's price, "we could close this week." [source: USAToday]

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