May 27, 2024

DealBook: Fiat Raises Chrysler Stake to 30 Percent

Fiat confirmed on Tuesday that it had obtained an additional 5 percent of Chrysler — increasing its stake to 30 percent after the American carmaker reached a sales goal of $1.5 billion in revenue outside of North America.

That target is the second one achieved as part of a 2009 agreement between the two carmakers. The first saw Fiat raise its stake in January from 20 percent to 25 percent, after Chrysler began producing a fuel-efficient engine at a Michigan plant. The third — which would trigger another 5 percent increase in Fiat’s stake — would occur if Chrysler succeeds in producing a fuel-efficient vehicle based on a Fiat platform.

With the latest Fiat increase, a United Auto Workers trust known as Veba now holds 59.2 percent of Chrysler, down from 63.5 percent in January; the American government owns 8.6 percent, down from 9.2; and Canadian authorities hold 2.2 percent, down from 2.3 percent.

In this change, Fiat did not acquire any new shares, nor did it spend money to purchase them. The transfer of interest was structured in commensurate decreases in the stakes of other shareholders. The changes in ownership, known as a performance equity event, were put in place to encourage a long-term partnership between Fiat and Chrysler.

After the Fiat stake reaches 35 percent, the carmaker will have the option to buy another 16 percent of Chrysler, but only if Chrysler has succeeded in paying off $5 billion of loans from the American and Canadian governments. The total loan facility from the two governments is $7.1 billion, with $2.1 billion remaining to be drawn down if necessary. While Chrysler has kept up with its interest payments, it has yet to pay down any of the principle, a person with knowledge of the matter said.

In addition to raising its stake, Fiat said it had agreed to increase Chrysler’s distribution in Brazil and the European Union through its dealers there and to compensate Chrysler for Fiat’s use of its technology outside of North America. Fiat also said it would pool Chrysler cars with its own for the purposes of European Union carbon dioxide emissions ratings.

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