Fiat has the money to increase its stake in Chrysler to 51 percent, says CEO

Article by Christian Andrei, on January 28, 2011

Fiat S.p.A. has “an abundant cash cushion” to boost its stake in Chrysler Group to 51% by the end of 2011, CEO Sergio Marchionne told analysts.

It can be recalled that earlier this month, Marchionne said that Fiat is on track to increase its share to 35% this year from the current 25%. But because Fiat has enough cash, Marchionne said that it will be able to fund this year’s investments as well as exercise an option to buy an additional 16% stake in Chrysler.

Fiat said that it had 15.9 billion euros ($21.8 billion) in cash at the end of 2010, 28% more than a year earlier. For this 16% stake, analysts estimate that Fiat may pay between $900 million to $4.4 billion.

Fiat raised its Chrysler holdings from 20% to 25% this month after Chrysler received approval to produce fuel-efficient engines in Dundee, Mich.

That was included in the three conditions tied to the agreement with the federal government that permitted Fiat to save Chrysler from its bankruptcy in 2009.

For the second test, Chrysler is required to post a total of $1.5 billion in sales outside North America and to enter agreements with 90% of its dealers in Latin America to offer Chrysler products. [via autonews - sub. required]

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