April 12, 2011 3:21 pm

Fiat increases its stake in Chrysler

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Italy’s Fiat has raised its stake in Chrysler from 25 per cent to 30 per cent after fulfilling a further condition stipulated by the US government in the Detroit carmaker’s 2009 restructuring.

Chrysler said on Tuesday that it had met the condition by achieving revenues outside North America of more than $1.5bn since it emerged from bankruptcy protection, and signing an agreement to distribute one or more Chrysler models through the bulk of Fiat’s dealers in Brazil – the carmaker’s second-largest market after Italy – and the EU.

The increase in Fiat’s stake marks another step in its drive to gain majority control of Chrysler. Sergio Marchionne, chief executive of both companies, has said that his goal is to gain a 51 per cent stake this year ahead of a planned public share offering.

In another step towards an IPO, Fiat is in talks with a group of banks that would allow it to replace $7bn of government loans with lower-cost debt. Mr Marchionne said this week that the talks were progressing well.

Chrysler is also seeking $3.5bn in low-interest US government loans for green technology projects.

The US government set three conditions for Fiat to raise its shareholding from the initial 20 per cent to 35 per cent. Fiat crossed the first hurdle this year by launching production of a fuel-efficient engine in Michigan. The third condition requires it to build a model in the US with fuel consumption of at least 40 miles per gallon.

Chrysler’s biggest shareholder is a United Auto Workers union healthcare fund, which has 59.2 per cent. The US Treasury now holds 8.6 per cent and Canada 2.2 per cent.

Fiat has cut a swathe through Chrysler since gaining day-to-day management control in mid-2009. On top of modernising and reorganising the Detroit carmaker’s plants, it is integrating the two companies’ operations more aggressively than Germany’s Daimler did when it controlled Chrysler from 1998 to 2007.

Several Chrysler models will be rebadged under the Fiat and Lancia nameplates for sale outside North America. Mr Marchionne has also raised the possibility of a Chrysler plant in Detroit building a Maserati sports-utility vehicle on a Jeep Grand Cherokee platform.

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