Fiat announced this week that it has exercised an option to buy another 3.3 percent of U.S. automaker Chrysler, bringing its total amount of shares in the company to 68.49 percent. Including this latest purchase, Fiat has exercised three of its six-monthly options.
The transaction is part of CEO Sergio Marchionne’s step-by-step purchases that are aimed at taking full control of Chrysler and creating a merged company in order to compete better with industry giants such as Toyota, GM and VW. Fiat also wants full control of Chrysler, as this would give it access to some of the latter’s cash flow for investments in new models.
The U.S. carmaker is Fiat’s No. 1 source of profit, as the Italian company struggles to curb losses in Europe. Had it not been for Chrysler, Fiat’s losses last year would have exceeded €1 billion ($1.28 billion). However, thanks to the good results in the U.S., the group’s net income amounted to €1.41 billion ($1.81 billion).
Fiat has been exercising options since mid-2012 to buy holdings of about 3.3 percent from VEBA, a healthcare trust for Chrysler’s retirees. The Italian carmaker hasn’t reached an agreement with the VEBA yet on the purchase of the trust’s remaining share in Chrysler.
The two sides are in litigation in a Delaware court over the price. While Fiat has valued Chrysler at $4.2 billion (€3.26 billion), VEBA thinks the carmaker is worth much more – $10.3 billion (€8 billion). Fiat has the right to increase its stake in Chrysler to 75 percent until July 2014.
By Dan Mihalascu
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