DETROIT — The federal government on Thursday shed the last of its stake in Chrysler, giving majority control of the carmaker to Fiat, the Italian company, while leaving taxpayers $1.3 billion short of recovering the full investment they made two years ago to keep Chrysler from going out of business.
The government had said in June that it expected to take that much of loss on its investment. But it has said that if it had not stepped in with a bailout and the company had been forced to shut down, the damage to the fragile economy would have been worse.
At the time Chrysler filed for bankruptcy in 2009, its prospects for survival appeared grim, even with the government’s help.
Still, the net loss on the Chrysler investment became political fodder over the terms of the federal bailout.
Representative Darrell E. Issa, Republican of California, said Thursday that the Obama administration “has sold out an American icon to a foreign company,” and is now “essentially giving that same company $1.3 billion of taxpayer money.”
The Treasury Department said in a statement that it had recovered $11.2 billion of the $12.5 billion it lent to Chrysler and that it would write off the bulk of the balance. The unpaid portion is on the balance sheet of the “old Chrysler” — a collection of unwanted assets being liquidated in bankruptcy.
As part of a previous agreement with the government, Fiat paid $500 million for the last of the Treasury’s 6 percent stake in Chrysler. Fiat, which bought Chrysler after it emerged from bankruptcy, had the right of first refusal. Fiat said in May that it wanted to buy the stake, and the price was negotiated after that.
Fiat also paid $60 million for the Treasury’s rights to buy additional Chrysler shares owned by a health care trust fund for retired members of the United Automobile Workers union, and $140 million for a smaller share owned by the Canadian government.
Chrysler, in a regulatory filing, said Fiat now owned 53.5 percent, on a fully diluted basis, of the carmaker, which returns to foreign ownership four years after its partnership with Daimler ended.
The union trust fund and Fiat, which has controlled Chrysler’s operations through a minority stake purchased in 2009, are the only remaining shareholders in Chrysler.
Fiat has said it expects to gain an additional 5 percent stake in Chrysler from the U.A.W. by the end of this year. Sergio Marchionne, the chief executive of both Fiat and Chrysler, last week said he planned to merge the management of the two companies, which would then operate essentially as one.
Congressional leaders, particularly in districts heavily reliant on jobs in the auto industry, applauded the move.
“We’ve seen a dramatic turnaround that’s not only great for Michigan but great for the country,” Representative Gary Peters, a Democrat whose district includes Chrysler’s sprawling headquarters in Auburn Hills, Mich., said in an interview. “It’s hard to make the argument that this was not a good investment. It’s a great investment for the taxpayers and the jobs that have been saved.”
Even though Chrysler is again controlled by an overseas owner, Representative Peters said, “the important thing is the jobs in America.”
In May, Chrysler repaid $7.6 billion to the American and Canadian governments, satisfying its full obligations to the countries.
Chrysler earned $116 million in the first quarter, its first profit since 2006. It will report second-quarter results on Tuesday.
“With today’s closing, the U.S. government has exited its investment in Chrysler at least six years earlier than expected,” said Tim Massad, the Treasury’s assistant secretary for financial stability. “This is a major accomplishment and further evidence of the success of the administration’s actions to assist the U.S. auto industry, which helped save a million jobs during the worst economic crisis since the Great Depression.”
The government still owns 26 percent of General Motors, after selling about half of its G.M. shares in the company’s November initial public offering. The Treasury is expected to begin selling more G.M. shares later this year, though they are currently worth about 11 percent less than the $33 offering price. To break even, the Treasury would need to sell its 500 million remaining shares at about $53 each.
A report in June by the White House National Economic Council estimated that the government would need to write off about $14 billion of the $80 billion given to the auto industry by the Bush and Obama administrations in late 2008 and early 2009.
Ian Austen contributed reporting from Ottawa.
Article source: http://feeds.nytimes.com/click.phdo?i=5989c049cd538e1a833f7eee6635034b
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