Fiat Raises Chrysler Stake, Readies for IPO
DETROIT - Fiat lifted its stake in Chrysler to 25 percent today as CEO Sergio Marchionne prepares for an upcoming round of meetings with bankers to refinance Chrysler's debt and to ready an initial public offering of shares.
Fiat said in a statement that it had raised its ownership in Chrysler to 25 percent from 20 percent at no financial cost under the terms of a deal that had been negotiated with the U.S. Treasury as part of Chrysler's bailout, reported Automotive News.
The announcement, which came as Chrysler showed off new and revamped vehicles at the Detroit auto show, increases the likelihood that Fiat will own a majority of Chrysler by the end of the year.
Marchionne said he and other Chrysler executives would begin more intensive meetings with Wall Street bankers in the current quarter to prepare for an IPO expected by the end of the year.
Refinancing a priority
The immediate priority will be to develop a plan to refinance Chrysler's bailout debt to the U.S. Treasury, Marchionne said.
"We have spent some time with the financial institutions the last two or three months and we are going to get into a much deeper discussion in the first quarter of 2011 as to how to get that done," Marchionne told Reuters Insider.
"I am expecting that by the second quarter of this year we will have a plan that we can announce," he said, speaking on the sidelines of the Detroit auto show.
Marchionne said it was possible that a Chrysler IPO could come before the fourth quarter, but that would depend in part on the strength of the stock market. "I think we need to do some more work before we open our trap," he said.
Marchionne said he hoped that Fiat's progress in restructuring Chrysler since it took control of the automaker in 2009 would silence the skeptics and win over potential investors and creditors.
Chrysler used the Detroit auto show -- the industry's largest trade show -- to showcase a redesigned and re-engineered version of its 300 sedan as well as a revamped mid-size sedan now known as the 200 and a refreshed version of its minivan.
"I think we've proved over the last 19 months what this group can do. A lot of people were incredibly skeptical about our ability to launch all of these products within a short period of time," Marchionne said.
Winning approval
Fiat was given management control of Chrysler and an initial 20 percent stake with the opportunity to raise its holdings to 35 percent by meeting certain performance targets set by the Obama administration.
By winning approval to build a Fiat-designed, fuel-efficient engine at a Chrysler plant in Dundee, Mich., the Italian automaker was cleared to raise its stake in Chrysler to 25 percent.
If Fiat helps Chrysler increase sales outside North America and builds a vehicle in the United States that achieves 40 miles-per-gallon in fuel efficiency, the Italian automaker can raise its stake in Chrysler to 35 percent.
Fiat recently spun off its truck and tractor division now known as Fiat Industrial. That spin-off was seen as clearing the way for the creation of a bigger trans-Atlantic auto group led by Marchionne.
Chrysler executives said they hope the second-generation 300, which had been developed in part before the automaker's bankruptcy, would win back luxury consumers who would not have considered its vehicles in recent years.
The first-generation 300 was a smash debut for Chrysler five years ago but the automaker was criticized for not investing enough in refinements to keep it competitive with newer full-size sedans from rivals like the Taurus from Ford Motor Co.
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