Fiat will buy stake in Chrysler
Fiat SpA, Italy’s largest carmaker, agreed to take a 35 percent stake in Chrysler LLC to gain a foothold in the world’s biggest auto market and give the U.S. company access to its small-car technology.
Turin-based Fiat and Cerberus Capital Management LP, the controlling shareholder in Auburn Hills, Mich.-based Chrysler, the third-largest U.S. automaker, signed a non- binding agreement, they said in a statement today.
An alliance won’t relieve Chrysler of the need for $4 billion in loans received from the U.S. Treasury, which must approve the deal. Fiat, which said it won’t make a cash payment and isn’t committing to future funding, will provide platforms to manufacture fuel-efficient and small cars to be produced by Chrysler. The pair will share distribution networks, allowing the Italian company to return to the U.S. with its main Fiat and Alfa Romeo brands for the first time since 1995.
“We’ll have to see how much Fiat will need to invest, but this would allow them to enter the U.S. market as a protagonist in a forthcoming recovery with its expertise in small cars, and that’s a great opportunity.” said Davide Manenti, head of research at Nuovi Investimenti Sim SpA in Biella, Italy.
Fiat rose as much as 6 percent to 4.75 euros in Milan trading and was priced at 4.68 euros as of 2:44 p.m. The stock has declined 1.7 percent this year, valuing the company at 5.6 billion euros ($7.3 billion). Ifil SpA, the Agnelli-family holding company that controls Fiat, traded up 5.3 percent.
The planned alliance is consistent with the terms and conditions of the U.S. Treasury’s bailout of Chrysler and restructuring efforts agreed as part of the refinancing must still take place, the statement said.
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