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Sunday, June 19, 2011

Fiat to Up Ownership of Chrysler to 52 Percent, Take Controlling Interest

Today, Fiat announced that it would be spending an additional $500 million to buy the last of the U.S. Treasury’s shares in Chrysler, which will give it a controlling 52-percent share in the Pentastar company. Just a week ago, Fiat pumped $1.3 billion into Chrysler, upping its stake from 30 to 46 percent of the automaker.

When the deal is approved by the appropriate federal regulatory agencies, Fiat will become the fourth body to control Chrysler in the past 10 years. None of these owners saw success with Chrysler: Daimler paid $36 billion in its merger/takeover of Chrysler in 1998, and sold it for $7.4 billion in 2009. Cerberus, the private equity firm that acquired Chrysler in 2009, oversaw the automaker’s descent into bankruptcy. The U.S. government, which then took over Chrysler, says that it will likely have lost $1.3 billion when it finally ceases to have any ownership in the company this year. (Some would argue, of course, that $1.3 billion was a fair government price to pay for keeping a major American industrial producer afloat. Others, maybe not.)

By the end of the year, Fiat may up its stake in Chrysler even further, to 57 percent. As of now, the second-largest shareholder in Chrysler is the United Auto Worker’s benefits fund, which is called the VEBA; it has 41.5 percent of the company.

Fiat’s CEO, Sergio Marchionne, also told reporters of an ambitious plan to sell 6.6 million cars worldwide between the two corporations in 2014. The combined sales for all of the Fiat- and Chrysler-owned brands globally in 2010 was 3.6 million, casting a dubious light on Mr. Marchionne’s claim. Fiat’s launch in the U.S. with the new 500 has been less than a smash hit; the company had previously targeted 50,000 sales for 2011, and revised that number downward to 45,000 a few weeks ago. To date, just 3141 examples of the stylish hatch have been sold, and we expect total sales for 2011 to fall well short of the hoped figure. BMW’s Mini line—which consisted of the hatchback, convertible, and Clubman at the time—racked up 45,644 U.S. sales in 2010.

We’ll bring you more news on Fiat’s takeover of Chrysler as it develops.

View the original article here

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