In a deal that would sever Obama administration's link with Chrysler, the U.S. Treasury Department sold its stake in the car manufacturer to Fiat.
Sources having knowledge of the matter said that the sale is subject to regulatory approval and that all the formalities are likely to consummate within 3 months.
The $560 million deal would devoid the taxpayers of recovering their investment in the carmaker to the tune of $1.3 billion.
The White House however argues that the jobs saved from bailing out Chrysler far outweigh taxpayer losses.
The latest deal “accelerates our integration agenda designed to create a global, efficient and competitive automaker, and guaranteeing to our extended Chrysler family a sound future.”-- Fiat CEO Sergio Marchionne
Prior to this, the government has recovered approximately $10.6 billion of the TARP funds invested in the Auburn Hills automaker.
Put together, 90 percent of the bailout money put in at a time when the automaker was reeling under recessionary forces has been recovered by the government.
President Obama will now head to a Chrysler plant in Toledo, Ohio, Friday to meet Fiat CEO Sergio Marchionne and announce the deal.
“As Treasury exits its investment in Chrysler, it’s clear that President Obama’s decision to stand behind and restructure this company was the right one,” Treasury secretary, Timothy F. Geithner, was quoted as saying in The New York Times.
“Today, America’s automakers are mounting one of the most improbable turnarounds in recent history- creating new jobs and making new investments in communities across our country,” added Geithner.
Fiat at the steering wheel
The 6 percent stake that Fiat has acquired would mean that it has a 52 percent majority in Chrysler. As a part of the restructuring and bailout exercise, the Italian automaker had agreed to run Chrysler, but had not paid for the initial 20 percent stake it acquired.
Marchionne said the latest deal “accelerates our integration agenda designed to create a global, efficient and competitive automaker, and guaranteeing to our extended Chrysler family a sound future.”
Fiat has also agreed to buy options held by the American and Canadian governments to purchase Chrysler shares held by a United Automobile Workers union trust fund for $5 billion.
The Obama administration is now left with the task of selling off its 26 percent stake in General Motors Co., the other of two bailed-out automakers.
Analysts expect that the Treasury will incur a loss to the tune of $10 billion from the GM sale.