Fiat to purchase a bigger stake in Chrysler in the second quarter of 2011

Article by Christian Andrei, on December 17, 2010

Analysts at UBS AG said that Chrysler Group LLC, which is operated by Fiat S.p.A., may refinance U.S. government loans by March, enabling Fiat to purchase a bigger stake in the second quarter.

Philippe Houchois, the London-based lead analyst on a UBS report, told clients that in Fiat’s de-merger roadshow meetings, it is clear that taking control of Chrysler is a priority.

Fiat has been making moves to spin off its truck and tractor divisions to focus on carmaking and as part of this plan, it has been briefing analysts.

Houchois said that it’s possible that Chrysler may borrow money to repay the U.S. Treasury in the first quarter, consolidate with Fiat during the second quarter and hold an initial public offering in the third quarter. He described this plan as “aggressive” but the company considers the timeframe that it is in to be “realistic.”

Last week, Sergio Marchionne, the CEO of both Chrysler and Fiat, said that he is thinking about repaying U.S. and Canadian government loans before 2013, which may enable Fiat to exercise an option to raise its ownership by 16%.

In relation to Chrysler’s bankruptcy reorganization in 2009, Fiat obtained a 20% stake. It’s likely to get 15% more when Chrysler builds a small engine in the U.S., attains sales objectives outside of North America and sells a domestically made car in the U.S. that achieves 40 mpg. [via autonews  - sub. required]

Topics: fiat, chrysler, shares

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