Fiat Has The Cash to Raise Chrysler Stake to 51%
TURIN - Fiat S.p.A. has enough cash to boost its stake in Chrysler Group to 51 percent by the end of this year, CEO Sergio Marchionne said.
Today’s statements by Marchionne, who leads both automakers, follow comments earlier this month indicating Fiat is on track to lift its share to 35 percent this year from the current 25 percent, Automotive News reported.
On a call with analysts today, Marchionne said Fiat has “an abundant cash cushion” that would allow Fiat to fund this year’s investments as well as exercise an option to purchase an additional 16 percent of the U.S. automaker.
Fiat today reported it had 15.9 billion euros ($21.8 billion) in cash at the end of last year, 28 percent more than a year earlier.
Analysts estimate Fiat may pay between $900 million to $4.4 billion for the 16 percent.
Reaching benchmarks
Fiat raised its Chrysler holdings to 25 percent from 20 percent this month after the U.S. automaker won approval to build fuel-efficient engines in Dundee, Mich. That was one of three conditions tied to the deal with the federal government that allowed Fiat to rescue Chrysler from a U.S. steered bankruptcy in 2009.
The second test requires Chrysler to record a total of $1.5 billion in sales outside North America and to obtain agreements from 90 percent of its dealers in Latin America to carry Chrysler products.
The third requires the development of a compact car on a Fiat platform that will achieve 40 mpg. Marchionne has said he expects all those requirements to be met this year.
First things first
From there, Fiat has an option to boost the holding to 51 percent -- but only after Chrysler repays U.S. and Canadian government bailout loans.
“It is possible that we’ll go over the 50 percent mark if Chrysler decides to go to the markets in 2011,” Marchionne, 58, said this month at the Detroit show, referring to an initial public offering.
Marchionne also said Chrysler had met with Goldman Sachs and other banks about raising new financing that would pay back in 2011 about $7.5 billion in bailout debt owed to the United States and Canada.
Fiat may pay $900 million to $1.7 billion for the 16 percent stake before a Chrysler IPO while the same stake could be worth between $1.9 billion and $4.4 billion after the listing, according to Philippe Houchois, a London-based analyst at UBS AG.
Fiat said today that fourth-quarter earnings before interest, taxes and one-time items -- which Fiat calls trading profit -- rose 26 percent to 615 million euros.
More Industry

Kia Closes Out Summer With a Bang
Its U.S. subsidiary broke multiple records in August, in part due to a surge of demand for hybrids models.
Read More →
Indiana Dealership Changes Hands
A 30-year-old Ford dealership in Indiana has a new owner and will soon be undergoing renovations to meet manufacturer requirements.
Read More →
Texas Dealership No Longer in the Family
The Ford store, a longtime cornerstone of the Houston market, is now part of one of the fastest-growing U.S. auto groups.
Read More →
Genesis Grows California Presence
The Cardinale Automotive Group opened its third Genesis rooftop in the Golden State, Genesis of San Bruno, a stand-alone dealership serving the San Francisco Bay Area.
Read More →
August Auto Sales a Mixed Bag
An early forecast shows strong business despite consumer hurdles, and hybrids are a big piece of their affordability coping strategy.
Read More →
EV Market Humming Along
July sales show steady growth as the segment stabilizes from last year’s artificial surge following pullback of federal support.
Read More →
Auto Loan Delinquency Rates Stabilize
Auto loans are a main driver of nonmortgage consumer debt, but delinquency rates stabilized in the second quarter across all credit risk tiers.
Read More →
EV Sales Recover in Q2
The EV sales roller coaster continues as numbers show improvement, but industry experts predict a year-over-year third-quarter decline and fourth-quarter jump.
Read More →
The Cheapest Hybrids to Fuel
The powertrain is increasing in popularity, in no small part due to its fuel economy. A new report lists the most efficient hybrids on the market.
Read More →
Hybrids and SUVs Gaining Ground
The most recent Kelley Blue Book Brand Watch found that only two nonluxury brands increased in shopper consideration, buoyed by their hybrid and SUV offerings.
Read More →