Chrysler buyout deal to allow Fiat execs to focus on operations

Article by Anita Panait, on January 9, 2014

Fiat’s $4.35-billion agreement to purchase the 41.5-percent of Chrysler Group that it does not still own will allow the merged carmaker's executives to focus fully on building and selling vehicles, analysts say. Executives have been pre-occupied with stocks negotiations with the UAW retiree health care trust that owns the stake.

Prior to the deal, the trust had caused Chrysler officials to file documents for a possible initial public offering. Jeff Schuster, senior vice president of LMC Automotive, remarked that the stock negotiations and the IPO were "a distraction" that might have caused "some delays in expected launches for programs in the [2015 and 2016] time frame.” He noted that the recent agreement is a good sign for the group “to get back to the car business."

Under the terms of the agreement, Fiat has to pay $1.75 billion in cash to the trust, with Chrysler paying $1.9 billion upfront and another $700 million over the next four years. In total, Fiat will pay $6.3 billion to own 100 percent of Chrysler, less than the $7.4 billion that Cerberus Capital Management paid to acquire 80 percent of Chrysler in 2007. 

The agreement is expected to be finalized on or around Jan. 20, 2014. While the buyout will only change a few, if any, operations, Fiat will still control the Chrysler management but UAW will lose a seat on the US carmaker’s board. Fiat-Chrysler chief executive Sergio Marchionne has said that the Italian carmaker may seek to relist its shares in the US when it completes its acquisition of Chrysler.

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Topics: chrysler, fiat

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