Sergio Marchionne looking to unify Fiat and Chrysler by 2015

Article by Christian Andrei, on November 1, 2012

A “unification” of Fiat SpA and Chrysler Group LLC is what Sergio Marchionne, the CEO of both car companies, hopes to achieve by 2014 or 2015. In a conference call last Tuesday, Marchionne said that this has always been his objective. He explained that its strategy has yet to be mapped out, considering that it first has to resolve the European situation.

Marchionne made these statements as he was discussing Fiat’s plan to buy the remaining 41.5% of Chrysler. This stake is owned by a United Auto Workers union healthcare trust for retired Chrysler workers, a voluntary employees beneficiary association. Fiat took a 20% share in Chrysler during its bankruptcy but it has since increased its ownership to 58.5%.

Fiat would first need to strengthen its financial position in the European economy. He said that it’s clear from Fiat’s capital needs and its liquidity, it’s not likely to have the ability to finance a takeout of the minority stake in Chrysler, “unless something extraordinary happens and we find liquidity through other means." He added that what he can pledge to do is that Fiat will push through with its plan to buy 3.3% of Chrysler every six months by exercising a call option permitted in the 2009 bankruptcy agreement with the U.S.

Treasury. In this manner, Fiat can purchase as much as 16.58% of Chrysler. Doing so may increase Fiat's stake to about 75%. Fiat filed a suit against the healthcare trust in September since the trust did not sell the 3.3% share in July as Fiat had filed for.

Both sides are not in agreement over the price that Fiat still has to pay to get the increased share. Fiat made an offer of $139.7 million. So far, there’s no update available about the suit. The July call option was the first one to be exercised by Fiat. Marchionne said that Fiat intends to exercise another call option in January.

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