Fiat to Raise Chrysler Stake to 58.5% by Year-End
Fiat expects to take its holding in Chrysler from 53.5% to 58.5% by the end of 2011, pending achievement of performance targets set in the original restructuring deal.
Fiat expects to raise its stake in Chrysler Group LLC from 53.5% to 58.5% by the end of 2011, provided the US carmaker meets a set of performance targets. The move, outlined in company presentations and statements from chief executive Sergio Marchionne, would further consolidate Fiat's control over Chrysler as the Italian group seeks to create a global automaker.
The additional 5% share is contingent on Chrysler achieving specific milestones agreed during the US manufacturer’s 2009 restructuring. These relate to the launch and export of a fuel-efficient vehicle built in the US, using Fiat technology, to markets outside North America. Fiat has been steadily increasing its holding in Chrysler since the initial deal, which saw it take management control and a minority stake after Chrysler’s bankruptcy.
Marchionne, who leads both Fiat and Chrysler, has said that the company remains committed to the integration strategy despite the difficult conditions in Europe. Fiat’s European operations have been loss-making, with sales in Italy forecast to fall to 1.8 million units in 2011, the lowest level since 1983. The group is targeting break-even in Europe by 2014, but the ongoing eurozone debt crisis and weak consumer confidence have made recovery challenging.
Alfa Romeo's US return delayed
Fiat’s plans for Alfa Romeo’s return to North America have been pushed back. The relaunch, which was to begin with the Alfa 4C sports car, will now not take place before 2013. Marchionne attributed the delay to the economic uncertainty in Europe, which has forced the group to review its global product rollout. The Giulia saloon and estate, originally due in 2013, are now scheduled for 2014.
Fiat dealers in the US have been relying on the Fiat 500 as their only model, and the postponement of Alfa Romeo’s re-entry means a longer wait for a broader product range. The delay reflects the wider strain on Fiat’s global ambitions as it manages the integration with Chrysler and copes with weak demand in its home market.
Chrysler flotation on hold
While Fiat has made no secret of its aim to fully merge with Chrysler, market volatility in 2011 meant a public flotation of Chrysler shares was not feasible. The original plan had envisaged an IPO to help fund Fiat’s eventual takeover, but the instability in global markets put those plans on ice. For now, Fiat’s incremental stake increases are the main route to greater control.
