Fiat SpA acquired full control of its Chrysler Group LLC unit in the U.S., setting the stage for the Italian car maker to form a manufacturer with the scale to better challenge the biggest players in the auto industry.
Fiat paid a United Auto Workers retiree health-care trust, Chrysler’s other owner, $1.75 billion in cash, while the U.S. vehicle producer provided a $1.9 billion special dividend to the labor group plus the first of four annual installments that will total $700 million,Turin-based Fiat said Tuesday in a statement.
The $4.35 billion deal completes a step in Fiat Chief Executive Officer Sergio Marchionne’s decade-long drive to convert the company from an unprofitable regional player into a car maker with worldwide ambitions. Marchionne, 61, will remain as CEO through at least 2016 to pursue the merger of Fiat and Chrysler as part of a strategy to maintain earnings growth, Chairman John Elkann said last week.
Marchionne has estimated that Fiat and Chrysler together would be the seventh-biggest car maker worldwide. The two companies sold about 4.4 million vehicles combined last year, less than half the annual deliveries of Wolfsburg, Germany-based Volkswagen AG, Detroit-based General Motors Co. and Toyota Motor Corp.
Fiat began accumulating Chrysler stock in mid-2009 as part of a U.S. and Canadian government-backed rescue of the Auburn Hills, Mich.-based car maker during the global recession. The Italian company’s stake increased to 58.5 percent, with the U.S. car maker union’s health-care trust holding the remaining 41.5 percent.
The two owners spent a year and a half in a dispute over how to value the trust’s stake, resolving the question in a deal reached in the closing days of 2013.
“We reached a successful conclusion that will benefit the trust’s retirees,” Robert Naftaly, chairman of the committee that governs the trust, said in a separate statement. “As a result, the trust is stronger.”
Fiat’s board will meet next Wednesday to lay out terms of merging the two car makers, including the corporate organization and the location of its headquarters and main stock listing, Elkann said at a North American International Auto Show press briefing last week. The combined company’s name will include Fiat and Chrysler. A three-year business plan will be presented in May.
Marchionne said at the Jan. 13 briefing that the U.S. has a “large claim” as the headquarters site, and that he favors New York as the primary listing for the group, which would also be traded on a second stock exchange.
The new entity will include the Italian manufacturer’s mass-market Fiat and Lancia brands and its upscale Alfa Romeo, Maserati and Ferrari marques, along with the U.S. company’s Chrysler and Dodge volume units and Jeep.
Models brought out by the car makers in the past year include the Alfa Romeo 4C sports car; the Jeep Cherokee, which went on the market two months ago; and Maserati’s Ghibli, the division’s first midsize sedan that’s pitched as an entry-level vehicle. Chrysler used the Detroit show to introduce a new version of its mid-size 200 sedan.
Fiat is planning to spend as much as $12.2 billion to develop and assemble vehicles in Italy, people familiar with the project said late in 2013. The program would focus the Fiat line on variants of the trendy 500 subcompact and budget oriented Panda small car while eliminating the compact Punto hatchback, and would create a convertible version of Alfa’s 4C, according to the people.
Marchionne said at the Detroit auto show that, once the Chrysler combination is complete, Fiat would be open to additional partnerships with other car makers, such as Paris-based PSA Peugeot Citroen and Japanese manufacturer Suzuki Motor Corp. There’s less urgency in taking such a step now that the Italian-U.S. company has “the credentials to be at the table” with the other top global automakers, he said.
Business, Pages 23 on 01/22/2014