P&A Providers & Administrators
MenuMENU
SearchSEARCH

Fiat Won’t Risk Credit Rating Cut to Buy Chrysler Stake, Marchionne Says

June 16, 2011
3 min to read


Fiat SpA Chief Executive Officer Sergio Marchionne said the Italian carmaker won’t risk a credit- rating downgrade to gain full ownership of Chrysler Group LLC.


“We can’t jeopardize the rating of Fiat,” Marchionne told reporters late yesterday in Gavi, Italy, at a presentation of the Freemont sport-utility vehicle. “The easiest route” is an initial public offering at Chrysler instead of an outright purchase of the stake Fiat doesn’t currently own, reported Bloomberg.

Ad Loading...


Fiat was placed under review for a possible downgrade by Moody’s Investor Services and Fitch Ratings in April after the carmaker announced plans to raise its Chrysler stake. Standard & Poor’s lowered its long-term corporate credit rating on the carmaker to BB in February and confirmed its “negative outlook.” All Fiat’s ratings are below investment grade.


The automaker, based in Turin, Italy, last month consolidated Chrysler’s results, a sign of the rapid integration of the two since the Auburn Hills, Michigan-based manufacturer exited bankruptcy in June 2009. S&P said in April its “negative outlook” reflected the “very substantial” operating and financial risks related to increased Chrysler exposure.


A share sale at Chrysler, as opposed to a purchase of the remaining shares, would mean less direct risk exposure for Fiat. Marchionne said yesterday he’s not in talks to acquire the United Auto Workers retiree health-care trust fund’s stake in the U.S. automaker. An IPO of Chrysler isn’t on tap for this year, he added.


“The market is not there” for a share sale, he said in an interview.


Fiat fell as much as 5 cents, or 0.7 percent, to 7.28 euros and was down 0.3 percent to 7.31 euros as of 10:11 a.m. in Milan trading. The shares have gained 9.1 percent this year, valuing the carmaker at 8.94 billion euros ($12.9 billion).

Ad Loading...


Fiat, which was initially granted a 20 percent stake in Chrysler by the U.S. government, aims to hold 57 percent of the third-biggest U.S. automaker by the end of 2011. The UAW trust will have 41.5 percent of Chrysler at that time, Fiat said.


Fiat agreed June 3 to pay $500 million for the U.S. government’s remaining 6 percent stake in Chrysler, boosting its holding to 52 percent. The CEO expects to receive an additional 5 percent stake in the fourth quarter in return for developing a fuel-efficient car for Chrysler.


Fiat has also made an offer to buy Canada’s 1.5 percent holding in Chrysler for $125 million and has acquired the U.S. government’s rights to buy the shares held by the UAW’s retiree trust, also known as VEBA.


“Marchionne may wait to see how Fiat and Chrysler cash generation develops and then decide whether to buy the VEBA stake or go for an IPO,” said Massimo Vecchio, a Mediobanca Spa analyst in Milan who has an “outperform” rating on Fiat. “Strong cash flow at Fiat and Chrysler are crucial to finance the call options exercise and to enhance company value.”


Marchionne also said that a listing of Ferrari SpA, Fiat’s most profitable unit, isn’t currently on the table, while it’s “always a possibility.”

Ad Loading...


Fiat has enough liquidity and has “no urgency” to issue new bonds, Marchionne said. The Italian carmaker this week confirmed its financial targets for 2011, including net income of about 300 million euros and its plan to sell 6 million cars with Chrysler by 2014.


Marchionne is pushing Chrysler this year to raise its global sales by 32 percent to 2 million vehicles and turn an annual profit of $200 million to $500 million. Chrysler last month posted a first-quarter net income of $116 million, its first since emerging from bankruptcy in 2009. Global sales during that period increased by 18 percent.


Marchionne said that Fiat isn’t interested in buying General Motors Co.’s Adam Opel unit. German magazines Der Spiegel and Auto Bild reported on June 9 that GM is prepared to sell Opel as losses at the European division persist. Fiat was a suitor for Opel when it was for sale in 2009.

More Industry

Kia Niro SUV in gold color parked outdoors
Industryby Hannah MitchellSeptember 1, 2026

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 →
Outside of Auto Park Ford dealership
Industryby Lauren LawrenceSeptember 1, 2026

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 →
Three men standing in front of two classic cars handing off gift.
Industryby Hannah MitchellAugust 25, 2026

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 →
Ad Loading...
Outside of modern car dealership “Genesis of San Bruno
Industryby Lauren LawrenceAugust 25, 2026

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 →
Red Honda Civic hybrid sedan on two lane road with green hills in background
Industryby Hannah MitchellAugust 21, 2026

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 charger inserted into dark-colored car port
Industryby Hannah MitchellAugust 18, 2026

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 →
Ad Loading...
car in background with hand giving a thumbs up in front
Industryby Lauren LawrenceAugust 14, 2026

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 →
blue sky, yellow and orange rollercoaster with riders going up an incline
Industryby Lauren LawrenceAugust 12, 2026

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 →
Photo of blue Toyota Prius parked next to body of water with city skyline in background
Industryby Hannah MitchellAugust 5, 2026

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 →
Ad Loading...
white SUV parked in front of a body of water with a gray sky background
Industryby Lauren LawrenceAugust 5, 2026

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 →