Fiat won’t risk a credit-rating downgrade to gain full ownership of Chrysler

Article by Christian Andrei, on June 15, 2011

Fiat S.p.A. isn’t willing to risk a downgrade to its credit rating to get full ownership of Chrysler Group LLC, according to CEO Sergio Marchionne. He also said that there have been no talks to acquire the stake of the United Auto Workers retiree health-care trust fund in Chrysler.

Reporters were able to talk to Marchionne last Tuesday in Gavi, Italy, during the introduction of the Fiat Freemont, a European version of the Dodge Journey sport-utility vehicle.

He said that an IPO would be the “easiest route”; however, it won’t do anything to “jeopardize” Fiat’s rating. Beginning May 24, Fiat consolidated Chrysler's results, indicating the rapid integration of the two automakers.

He explained that there’s progress in its goal to buy Canada's stake in Chrysler but it’s highly unlikely that there will be an IPO of Chrysler this year. He said that there is no market for a share sale to take place this year.

The U.S. government initially granted a 20% stake in Chrysler to Fiat, which now seeks to acquire 57% of the U.S. automaker by the end of 2011. Fiat said that by that time, the UAW trust will hold 41.5% of Chrysler.

Fiat had been put under review for a potential downgrade in its credit rating by Moody's Investors Service and Fitch Ratings in April. Standard & Poor's lowered Fiat’s long-term corporate credit rating to BB from BB+ in February after it was able to spin off its industrial operations. These two ratings fall below investment grade.

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