Fiat agrees to buy the remaining Chrysler Group stock from the Feds

By Editors on June 3, 2011 12:05 PM

Barely a week after the Chrysler Group LLC announced a debt restructuring that allowed it to fully repay the money it owned to the U.S. and Canadian governments as part of its 2009 bankruptcy bailout, parent company, Fiat, announced a deal to acquire the final 6.6-percent of Chrysler stock still owned by the U.S. Treasury Department (UST). This latest acquisition, which will see Fiat pay $500 million for the UST's 98,461 remaining shares, gives the Italian automaker a 52-percent majority position in Chrysler Group LLC. At the end of the transaction, the U.S. government will have recovered roughly $11.2 billion of the $12.5 billion it has initially invested. While the Canadian government still holds a 1.5- percent position in the firm, Fiat also has expressed interest in acquiring those shares at some point in the near future.

As part of the agreement -- which still needs to undergo a final approval process -- Fiat also agreed to buy up the federal government's option to purchase the remaining shares held in the UAW's VEBA (Voluntary Employees Beneficiary Association) retiree trust fund for an additional $75 million. Of that amount, $60 million will go to the U.S government and the remaining $15 million to Export Development Canada (EDC), the holding company that represents the Canadian federal and Ontario provincial governments. At present, the UAW trust holds 41.5 percent of the outstanding Chrysler Group LLC stock. As part of its original TARP (Troubled Asset Recovery Program) deal, Fiat will be permitted to acquire an additional five percent interest in Chrysler this fall, pending the arrival of a new Dodge-badged offering that's needs to earn a 40-mpg highway rating from the EPA.

In making the announcement, Sergio Marchionne, CEO of Fiat S.p.A. and Chrysler Group LLC, noted: "The agreement reached today marking the complete exit of the United States Treasury (UST) as a Chrysler Group shareholder does not lessen the sense of gratitude that we feel toward President Obama's administration for believing two years ago in Chrysler's partnership with Fiat. The acquisition of the UST's rights under the Equity Recapture Agreement is a further demonstration of the trust we have in the future of Chrysler and its ability to continue on a path to take its rightful place in the global automotive industry landscape."