Fiat’s demerger activities accelerating tie-up with Chrysler

Article by Christian Andrei, on January 10, 2011

After completing a demerger of its carmaking activities from its truck and tractor business, Fiat S.p.A. is eyeing a majority stake in Chrysler Group LLC. The demerger is part of Fiat CEO Sergio Marchionne's efforts to revamp Italy's biggest industrial group with the aim of helping forge alliances and boosting growth.

Marchionne recently told reporters that if Chrysler is listed in 2011, Fiat should think about speeding up the option of increasing its stake. The new Fiat SpA and Fiat Industrial shares recently started trading on the Milan bourse.

Fiat already has a 20 percent stake in Chrysler and the spin-off of its truck and tractor division now known as Fiat Industrial paves the way for it to increase its stake in Chrysler, thus making a bigger transatlantic carmaking group.

Marchionne, who leads the biggest restructuring ever at century-old Fiat, said the group had no current plans to merge Fiat and Chrysler but said Fiat was considering hiking its stake to 51 percent in 2011.

Fiat and Fiat Industrial shares were trading at a combined market value slightly above the old Fiat group's capitalization of EUR19 billion ($25.4 billion).

The split, which main investor John Elkann has called a defining moment in Fiat's history, is also expected to raise the chances of a full merger with U.S. carmaker Chrysler, which Fiat bought into in 2009 when the U.S. group nearly collapsed. Giulio Battisti, a fund manager at Horatius Sim, said Marchionne's planned demerger has already had a "positive effect." [via autonews - sub. required]

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