Fiat SpA finalizes Chrysler buyout image

As it gears up to use their combined resources to turn around the loss-making operations in Europe, Fiat has completed its buyout of Chrysler, making the US business a wholly-owned subsidiary of the Italian carmaker.

Ending more than a year of tense talks that had obstructed Chief Executive Sergio Marchionne’s efforts to create the world’s seventh-largest automaker, the company announced on January 1 that it had struck a $4.35 billion deal – cheaper than analysts had expected – to gain full control of Chrysler.

Fiat said on Tuesday that it had completed the acquisition of the remaining 41.46 % stake in Chrysler from a retiree healthcare trust affiliated with the United Auto Workers (UAW) union. The trust, known as a voluntary employee beneficiary association, or VEBA, received $3.65 billion in cash for the stake, $1.9 billion of which came from Chrysler and $1.75 billion from Fiat.

Chrysler has also committed to giving the UAW trust another $700 million in four equal annual installments, the first of which was paid in connection with the deal closure, Fiat said.

Debt and equity investors have closely watched the Chrysler buyout talks because Fiat’s long-term plan to cut losses in Europe depends on its ability to deepen ties with Chrysler.

The US business is now a profit center for Fiat, but the two companies are still forced to manage their finances separately. A full merger will make it easier – but not automatic – to combine the cash pools of the two companies, giving Fiat more funds to expand its product line-up.

The company is widely expected to move its headquarters outside Italy, where Fiat was founded 115 years ago – a sensitive topic among local unions and politicians eager to protect jobs in Fiat’s home market.

Via Reuters