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US to score R3.8bn from Fiat

2011-06-03 13:29

INCHING FORWARD: Once its latest deal is completed, Fiat will own a 52-percent stake in Chrysler, giving the Italian automaker a majority share in the US carmaker.

WASHINGTON - The US Treasury has announced an agreement to sell its remaining six percent equity stake in Chrysler to Italy's Fiat in a deal that will net Washington the equivalent of about R3.75-billion.

The proceeds of the deal include the sale of the government's interest in a United Auto Workers health-care trust fund, the Treasury added.

The Obama administration invested $12.5-billion in Chrysler under the Troubled Asset Relief Programme in 2009 as part of an auto industry bail-out that eventually brought both Chrysler and General Motors through bankruptcy court.

After the transaction with Fiat the US Treasury will have received some $11.2-billion back in principal repayments, interest and canceled commitments from Chrysler.

"Treasury is unlikely to fully recover the difference of $1.3-billion," the statement said.

Treasury Secretary Timothy Geithner said the administration bail-out had enabled automakers to mount "one of the most improbable turnarounds in recent history" that is now creating jobs as domestic automakers regain market share.

Fiat agreed to pay the US Treasury $500-million for its 98 461 Chrysler shares and a further $75-million for shares held by the UAW retiree trust.


The announcement of the deal with Fiat came on the eve of US president Barack Obama's scheduled visit to a Chrysler plant in Toledo, Ohio, where he was expected to tout the success of the auto bail-out that saved American jobs and historic auto nameplates like Chrysler.

Treasury said that once the transaction is completed, it will have fully exited its investment in Chrysler. Since the 2007-2009 financial crisis ended, Treasury has been making every effort to sell off interests it acquired in industry as part of the rescue effort during those troubled years.

Before Thursday's announcement, Fiat held a 46 percent interest in Chrysler. That will rise to 52 percent when the transaction is completed and thus give the Italian automaker majority control, which was one of Fiat CEO Sergio Marchionne's overarching goals for 2011.

Fiat has made swift work toward that goal in the past six months after meeting certain performance targets and repaying its loans owed to the United States and Canada last week.


Chrysler filed for bankruptcy protection in 2009 after the credit crunch and recession pummeled auto sales. June 10, 2011 will mark the two-year anniversary of Chrysler's emergence from bankruptcy under the management of Fiat.

Marchionne's revival strategy for both automakers hinges on boosting combined sales to 6.6 million vehicles by 2014, an ambitious goal considering that Fiat and Chrysler together sold just over 3.6-million vehicles globally last year.

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