Fiat finishes $4.35 billion acquisition of Chrysler LLC

Italian carmaker seeks name for united firm

1/21/2014

Marchionne

ASSOCIATED PRESS

DETROIT — Fiat SpA said Tuesday it has completed a $4.35 billion deal to acquire all of Chrysler Group LLC’s remaining shares from a union-managed trust.

The deal gives the Italian carmaker the scale to better challenge the biggest players in the auto industry.

Sergio Marchionne, Fiat chief executive officer, has been trying to convert the company from an unprofitable regional player into a carmaker with worldwide ambitions. Mr. Marchionne, 61, will remain as CEO through at least 2016, company chairman John Elkann said last week in Detroit.

Mr. Marchionne has estimated that Fiat and Chrysler together are the seventh-biggest carmaker worldwide. The two firms sold about 4.4 million vehicles combined last year, less than half the annual deliveries of Volks-wagen Group, General Motors Co., and Toyota Motor Corp.

The deal was to close by Monday but banks were closed for the Martin Luther King, Jr., holiday.

Completion of the deal ends Mr. Marchionne’s nearly five-year quest to merge the two automakers both operationally and financially. It also effectively means that Fiat fully owns Chrysler, even though it will retain its presence in Michigan.

The deal also resolves a lawsuit between Fiat and the UAW trust over the value of the shares and averts a potentially complicated initial public offering for Chrysler that the United Auto Workers’ Retiree Medical Benefits Trust could have forced the automaker to undertake.

For the UAW Trust, which provides medical benefits to 117,000 UAW-represented Chrysler retirees, the deal provides much-needed funding.

The UAW Trust said it received $3.825 billion Tuesday and said the proceeds will be used to provide additional funding security for the health benefits for Chrysler retirees and dependents.

Fiat became Chrysler’s controlling shareholder in 2009 when the Auburn Hills, Mich., automaker emerged from Chapter 11 bankruptcy.

Under the terms of the deal, Chrysler will contribute $1.9 billion and Fiat $1.75 billion to purchase the shares held by the UAW Trust. Chrysler also will pay $700 million more to the VEBA Trust in four equal annual installments.

A number of questions must be resolved now that Fiat and Chrysler are a unified company.

Mr. Marchionne said last week that Fiat’s board of directors will meet Jan. 29 to discuss a new name for the combined company, the stock exchange on which shares will be listed, and the site of the headquarters.

The issue of the name is sensitive on both sides of the Atlantic. In Italy, where Fiat is the largest private-sector employer, workers and unions have been on edge for several years, concerned that Fiat’s focus has been shifting to North America.

In the United States, memories still linger over the disastrous DaimlerChrysler marriage that was billed as a merger of equals in 1998.

“‘Fiat’ and ‘Chrysler’ will be in the name,” Mr. Marchionne said last week.