Fiat Boosts Stake in Chrysler to 25% After Hitting Business Milestone

Fiat Boosts Stake in Chrysler to 25% After Hitting Business Milestone
Fiat Boosts Stake in Chrysler to 25% After Hitting Business Milestone

Italian automaker Fiat increased its stake has in Chrysler Group to 25% after the U.S. automaker met a key business-performance goal, the company said Monday during the North American International Auto Show in Detroit.

Chrysler's decision to begin engine production at a plant in Dundee, Mich., was the first of the three goals laid out in a partnership agreement that allows Fiat to incrementally boost its ownership in Chrysler to 35% from 20%.

Other parties with large equity stakes in Chrysler include the U.S. Treasury, which holds a 9.2% stake, and governments in Canada with a 2.3% share. But the bulk of Chrysler -- 63.5% -- is owned by United Auto Workers union through its retiree health care trust.

The Dundee plant will soon begin production of a 1.4-liter engine to be used in the new Fiat 500 subcompact, which Chrysler plans to distribute soon through newly appointed dealers later in the quarter.

Fiat gained its initial 20% share in Chrysler as part of the automaker's government-backed bankruptcy reorganization in 2009. Fiat, run by Sergio Marchionne, who is also CEO of Chrysler, can add an additional 10% stake in two 5% increments if Chrysler achieves two additional business milestones.

The first of those goals relates to revenue and sales growth outside of North America, while the second has to do with commercial production in the U.S. of a 40 mpg vehicle based on Fiat designs.

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A week ago, it was reported that Fiat may seek to raise its stake in Chrysler to 51% this year ahead of an initial public offering by Chrysler. Fiat would be eligible to purchase an additional 16% stake in the Auburn Hills, Mich.-based company after Chrysler repays its loans to the U.S. and Canadian governments. In comments Monday at the Detroit auto show, Marchionne said U.S. taxpayers would see their investment in Chrysler repaid in full.

Despite the possibility of that Fiat might becoming a majority shareholder in Chrysler, the Italian automaker won't seek to merge the two companies, Marchionne said in Milan last week.

Marchionne has said that Chrysler would have been profitable throughout 2010 but for the interest payments on its loans, which totaled $899 million from January through September, The New York Times noted.

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