Money Matters - Simplified

Fiat buying remaining 6% US stake in Chrysler

Though the government ownership would end with this move of Fiat, the U.S. Treasury will still own 26.5 percent of General Motors.

Fiat is all set to buy the remaining 6 percent shares of the U.S. government in Chrysler, taking its stake above 50 percent in the Auburn Hills automaker.

This will bring an end to the government ownership completely which began 10 years ago when the company took government's help to emerge out of bankruptcy.

Fiat to acquire more than 50 percent stake in Chrysler
With Fiat buying the remaining 6 percent of the government shares, its stake would rise to 52 percent from the present 46 percent.

The deal which is expected to be finalized by June 10 will officially give the control of Chrysler to the Italian auto major.

Keller said that it was always anticipated by the analysts that Fiat would one day takeover Chrysler but no one expected it to happen it so soon.

The U.S. Treasury and Fiat are negotiating the price right now but if they fail to reach a settlement about the price by June 10, both parties have agreed to accept the average of the two estimates which are set by investment banks, a statement released by Fiat said.

President Barak Obama is going to visit the Chrysler’s Toledo plant next Friday.

Analysts feel that both the companies need the expertise of each other in the era of tough competition in auto sector.

Auto analyst, Maryann Keller said, “Neither one has the ability to compete alone in the kind of global environment that they face.”

Chrysler to come out of government ownership
Keller said that it was always anticipated by the analysts that Fiat would one day takeover Chrysler but no one expected it to happen it so soon.

The head of the Chrysler’s national dealer council, Alfred Flores, reacted, “This is great news for Chrysler..... It obviously gives us more autonomy to move forward.”

Though the government ownership would end with this move of Fiat, the U.S. Treasury will still own 26.5 percent of General Motors.

The governments of Canada and Ontario own 1.7 percent stake in Chrysler.

Rebecca Lindland, an auto analyst commented, “This gets them out from underneath any hint of government ownership and any of that negativity that went along with the bailout.”

Analysts called it as a good time for Fiat to buy Chrysler’s shares which has earned a profit of $116 million in the first quarter of this year. Incidentally this is the first quarter of profit for the company after 2006.

The value of the shares of Chrysler is expected to rise once the company’s profitability increases.