Thursday 14 December 2017

Fiat in the driving seat after 'historic' €3.2bn Chrysler deal

A Fiat car being manufactured at a Chrysler factory. Bloomberg
A Fiat car being manufactured at a Chrysler factory. Bloomberg

Tommaso Ebhardt and Mark Clothier

FIAT is to buy the remaining 41.4pc of US car-maker Chrysler it doesn't already own. The combined entity will be the world's seventh largest vehicles producer.

The Italian car-maker's chief executive, Sergio Marchionne, said the deal would "go down in the history books".

Fiat will buy the remainder of Chrysler from a US auto workers' pension fund in a €3.18bn deal that paves the way for a full merger to create a new global auto giant.

"The unified ownership structure will now allow us to fully execute our vision of creating a global automaker that is truly unique," said Mr Marchionne, who is also the chief executive of Chrysler.

Fiat said it expected the transaction to be completed by January 20, completing a process that began in 2009 when the company first began planning a merger with Chrysler after the American business emerged from bankruptcy.

The purchase price gives Chrysler a value of about €17bn. "This looks like a fair deal for the union and a reasonable valuation on Chrysler," said analyst Richard Hilgert.

It comes at a time of resurgence and transition in the US auto industry, which is rebuilding lineups from top to bottom to fuel record sales and profits. Full ownership of Michigan-based Chrysler will give Fiat the scale to challenge world leaders General Motors and Volkswagen.

It will allow Fiat to pool cash with Chrysler and tighten co-operation between its Alfa Romeo, Lancia and Maserati brands and the Chrysler, Dodge and Jeep nameplates.

Fiat now plans to invest as much as €9bn to revive underused Italian factories to stem losses in Europe, largely by accessing Chrysler's cash hoard. It already relies on Chrysler to sustain profits amid losses in Europe, where the car market has fallen to a two-decade low. Group net income, including minority holdings, totalled €1.41bn in 2012. Without Chrysler, Fiat would have posted a €1.04bn loss.

The company started accumulating Chrysler stock in June 2009 as part of a government and union bailout of the US carmaker, which was losing as much as €73m a day at the time. Rather than paying cash for the initial 20pc holding and subsequent 15pc stake, Fiat provided management experience and technology and helped Chrysler meet various performance milestones, such as developing models.

This latest acquisition also ends a potential Chrysler IPO, which was being forced by the pension trust amid a legal dispute over the holding's valuation.

Fiat and the trust also agreed to dismiss legal proceedings in Delaware as part of the agreement.

"I have been looking forward to this day from the very moment that we were chosen to assist in the rebuilding of a vibrant Chrysler back in 2009," said Fiat chairman John Elkann. (Bloomberg)

Irish Independent

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