U.S. to sell remaining 6 percent stake in Chrysler to Fiat

[News_Editor]

U.S. to sell remaining 6 percent stake in Chrysler to Fiat

2011-06-04 01:01:21 GMT+7 (ICT)

WASHINGTON D.C. (BNO NEWS) -- The United States Department of the Treasury on Thursday reached an agreement with Italian automaker Fiat to sell its remaining 6 percent stake in Chrysler Group LLC.

The U.S. will receive an expected total proceed of $560 million. Fiat agreed to pay $500 million for Treasury’s 98,461 shares of Chrysler. In this way, the U.S. will have fully exited its TARP investment in the American automaker and FIAT will become the majority stake holder with 52 percent.

"As Treasury exits its investment in Chrysler, it’s clear that President Obama's decision to stand behind and restructure this company was the right one," said Treasury Secretary Tim Geithner.

In addition, Fiat will pay $75 million for the Treasury's right to purchase all of the shares retained by the UAW retiree trust. Treasury will receive 80 percent of the proceeds ($60 million), while the Government of Canada will receive 20 percent ($15 million).

"This accord, which marks the definitive exit of the U.S. Treasury as a shareholder in the company, in no way diminishes the gratitude we fell towards the Obama Administration for having confidence in Chrysler's partnership with Fiat," said Fiat and Chrysler CEO Sergio Marchionne.

Fiat's share in Chrysler is expected to rise to 57 percent before the end of the year after it produces a fuel-efficient car for the U.S. market. In May, the Italian automaker increased its stake in Chrysler to 46 percent after exercising its option to purchase Treasury’s 6 percent fully diluted equity interest.

On May 24, Chrysler repaid $5.1 billion of its outstanding Troubled Asset Relief Program (TARP) loans and terminated its ability to draw a remaining $2.1 billion TARP loan commitment.

Chrysler's repayment came six years before he scheduled maturity of its TARP loans in 2017. Treasury committed a total of $12.5 billion to Chrysler under TARP's Automotive Industry Financing Program (AIFP).

So far, Chrysler has returned more than $10.6 billion of that amount to taxpayers through principal repayments, interest, and cancelled commitments. The 2009 TARP support to the U.S. auto industry was necessary to save General Motors and Chrysler.

U.S. President Barack Obama decided to provide support to the two automakers on the condition that all stakeholders make the sacrifices necessary to fundamentally restructure those companies and put them on a path to viability. This action saved the collapse of the American auto industry as well as more than 1 million jobs.

Chrysler/Fiat was able to repay $7.5 billion to the U.S. and Canadian governments by issuing $3.2 billion in bonds and taking out $4.3 billion in bank loans, while Fiat provided a further $1.3 billion.

It is expected that Fiat will be in no rush to go public now that it holds an absolute majority in Chrysler. A formal merger between the two automakers could be announced shortly as well.

In 2009, Fiat obtained its initial 20 percent stake in Chrysler in a non-cash operation but instead the Italian automaker offered its cutting-edge green technology as well as sales and service networks in Europe and Latin America.

At the beginning of 2011, Fiat gained a further 5 percent after it began producing fuel-efficient engines in the U.S. and last month was able to exercise an option for another 5 percent after Chrysler surpassed its sales targets outside the U.S.

-- © BNO News All rights reserved 2011-06-04