Fiat agrees to buy remaining Chrysler stake in $4.35 billion deal

Related Downloads

MILAN -- Fiat said Wedneday it had signed an agreement to buy the remaining 41.46 percent stake it does not own in Chrysler Group from the United Auto Workers VEBA Trust, the last step needed before the Italian and U.S. carmakers can merge.

In a statement, Fiat S.p.A. said the voluntary employee beneficiary association, which covers health care costs for the union's retirees, would receive $3.65 billion for the stake.

Chrysler also agreed to separately make a total of $700 million in four annual payments to the UAW's trust fund.

The deal is expected to close on or before Jan. 20, Fiat said.

"In the life of every major organization and its people, there are defining moments that go down in the history books," Sergio Marchionne, CEO of both carmakers, said in a statement. "For Fiat and Chrysler, the agreement just reached with the VEBA is clearly one of those moments."

Fiat Chairman John Elkann said in the statement he has been looking forward to this day since the rebuilding of Chrysler began in 2009.

"The work, commitment and achievement I have witnessed from Chrysler over the past four and a half years is nothing short of exceptional, and I take this opportunity to officially welcome each and every one of the people in the Chrysler organization to the integrated Fiat-Chrysler world."

Terms

The deal will allow Chrysler to avoid an initial public offering.

Fiat will pay the trust $1.75 billion from cash on hand when the deal closes. The Turin-based company said it would not need to make any capital increase through a rights issue.

Chrysler will contribute $1.9 billion through a special dividend to complete the transaction for the 41.5 percent stake.

The $700 million will paid in a series of four, $175 million annual payments from Chrysler to the VEBA trust, but come with a change agreed to by the UAW.

With the payments, the UAW has agreed that its members will adopt the best practices in use in Fiat plants around the world, instead of those just in use within the United States, a Chrysler source explained.

Exactly how this will play out in still unclear. The UAW could not be reached for comment. No specific details were included in a separate statement issued by Chrysler.

Currently, under Fiat's World Class Manufacturing system, its most productive plants in North America are the Windsor (Ontario) Assembly Plant, the Toledo (Ohio) Assembly Complex and the Dundee Engine plant in Dundee, Mich.

All three plants have achieved "bronze" status under the system's scoring, which measures a broad array of manufacturing metrics and boils them down into a score on a 100-point scale. To achieve bronze status, the plant has to have a score of at least 60.

Other Fiat plants globally implemented World Class Manufacturing earlier than did Chrysler's plants, and some have achieved silver or gold status.

The size of the transaction is lower than many analysts forecast. Banca Akros estimated in December that Marchionne would need to pay $4.5 billion for the holding.

Global industry player

Full ownership of Chrysler will enable Marchionne to create a global industry player with better scale to challenge General Motors Co. and Volkswagen AG. He has tried since taking the helm at Fiat in 2004 to buy a competitor to give the struggling Italian manufacturer a worldwide market strategy for growth.

"Marchionne did a stroke of genius in the New Year's Day," said Giuseppe Berta, a professor at Bocconi University in Milan who has written several books on the carmaker. "He showed he's a real maestro."

Marchionne estimated in June that Fiat and Chrysler combined would be the world's seventh-largest carmaker.

More benefits

Merging the two companies would allow Fiat to pool cash with Chrysler and tighten cooperation between its Alfa Romeo, Lancia and Maserati brands with Chrysler, Dodge and Jeep.

Fiat has relied on Chrysler to sustain profit amid losses in Europe, where the car market has fallen to a two-decade low. Group net income, including minority holdings, totaled 1.41 billion euros ($1.94 billion) in 2012. Without Chrysler, Fiat would have posted a 1.04 billion euro loss.

Fiat started accumulating Chrysler stock in June 2009 as part of a government and labor union bailout of the U.S. carmaker, which was losing as much as $100 million a day at the time. Rather than paying cash for the initial 20 percent holding and subsequent 15 percent stake, Fiat provided management experience and technology and helped Chrysler meet various performance milestones, such as developing models.

Reuters, Bloomberg, Larry P. Vellequette and Philip Nussel contributed to this report.

Contact Automotive News


advertising
Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.

Or submit an online comment below. (Terms and Conditions)


 
Automotive News Europe celebrates 20 years; watch this space for future trends


12:01 am U.S. ET | Feb. 5 2016

image
In an industry reshaping at the speed of light, Automotive News Europe brings you reliable, relevant and unbiased coverage of the auto business. ...
 Read More ›

How GM's 'shampoo princess' is restoring Opel's image


12:01 am U.S. ET | Feb. 4 2016

image
Opel marketing chief Tina Mueller, a former cosmetics executive dubbed the "shampoo princess," is pl ...
 Read More ›

Nissan claims win in Europe, but Toyota had more sales


12:01 am U.S. ET | Jan. 29 2016

image
Nissan claims it has achieved a long-stated goal of becoming the No. 1 Asian automaker in Europe by ...
 Read More ›

How GM zoomed past VW in China

Yang Jian
12:01 am U.S. ET | Jan. 25 2016

image
The Volkswagen Group was China's largest automaker in 2013 and 2014, but last year, General Motors r ...
 Read More ›

ZF executive 'remarkably comfortable' in one-on-one chat with Obama

Bryan Johnson
3:21 pm U.S. ET | Jan. 21 2016

image
The most commonly asked question I've received in the past 24 hours is: “Were you nervous?R ...
 Read More ›

What Nissan learned from Mercedes for Infiniti Q30 production


6:06 am U.S. ET | Jan. 20 2016

image
Nissan made some costly changes to build the Infiniti Q30 and QX30 compact cars at its UK factory. ...
 Read More ›

Aston Martin asks suppliers for cost cuts

Nick Gibbs
9:31 am U.S. ET | Jan. 14 2016

image
Aston Martin is asking suppliers to reduce costs by 10 percent annually as part of wider cost-cutting moves as the niche automaker adopts the practices of a mass-market... ...
 Read More ›

VW CEO Mueller's pride sets him up for a fall

Christiaan Hetzner
5:49 am U.S. ET | Jan. 13 2016

image
The air of self-confidence that convinced the Volkswagen Group's board that company veteran Matthias ...
 Read More ›

Ghosn on why Renault-Nissan really needs 2 CEOs

Hans Greimel
12:01 am U.S. ET | Jan. 11 2016

image
Globetrotting Carlos Ghosn, the time-zone traveling dual CEO of Renault and Nissan, is no stranger t ...
 Read More ›

Get ready for the unexpected in 2016

Luca Ciferri
12:15 am U.S. ET | Jan. 4 2016

image
If we have learned anything about the automotive industry in the past few years, it is to expect the unexpected. ...
 Read More ›

2015 Assembly map
 

Latest Headlines

More »