A neon sign shines out the showroom window of Balzekas Chrysler dealership June 8, 2009 in Chicago, Illinois.Scott Olson/Getty Images
Fiat has offered $125-million to buy the Canadian government's 1.7 per cent stake in Chrysler Group LLC, as it moves swiftly to increase its control of the U.S. automaker, Fiat CEO Sergio Marchionne said on Saturday.
Mr. Marchionne, who is also the CEO of Chrysler, said that if Fiat could reach a deal with VEBA -- the United Auto Workers' healthcare trust -- over the fund's 45.7 percent stake in Chrysler, a Chrysler IPO may "no longer be necessary."
An IPO of Chrysler would allow the VEBA to cash out of its position in the company. Mr. Marchionne said on Friday a public share offering for Chrysler was more likely in 2012 than this year.
Fiat already has an option on 40 per cent of VEBA's shares.
"We presented an offer last Thursday for the Canadian government stake," Marchionne told reporters in Venice on the sidelines of a conference.
The final tally for the $2.9-billion Canadian portion of the taxpayer bailout of Chrysler is becoming clearer.
The U.S. government will sell its 6.6-per-cent stake in Chrysler Group LLC to Fiat SpA for $500-million (U.S.), a deal that puts a price of about $129-million on the 1.7 per cent of the company held by the federal and Ontario governments.
Fiat has already begun discussions with the two governments about buying their stake in Chrysler, but whatever deal was negotiated with the U.S. government would likely set the benchmark for the Canadian stake, Mr. Marchionne said earlier this week.
If that price applies to the Canadian shares and the governments agree to sell, they will have received $1.959-billion (Canadian) in repayment for the money they contributed to a $15-billion bailout that saved Chrysler from liquidation and delivered management control of the company into the hands of Fiat. That would leave about $941-million that is unlikely to be recovered.
The two governments pumped $2.9-billion into Chrysler LLC, as it was known before it went into Chapter 11 bankruptcy protection on April 30, 2009, and into Chrysler Group LLC, the name the auto maker possessed when it emerged from protection six weeks later, on June 10, 2009.
Chrysler Group repaid $1.7-billion in loans last week and has paid $238-million in interest to Ottawa and Ontario. Pre-bankruptcy Chrysler paid $6-million (U.S.) in interest.
In addition to the loan repayments and interest, the Canadian governments will receive $15-million out of $75-million Fiat will pay to purchase a call option it and the U.S. government held on some of the shares of Chrysler owned by a United Auto Workers trust.
In events held earlier this week at Chrysler plants in Canada, federal Finance Minister Jim Flaherty and Ontario Premier Dalton McGuinty defended the bailouts of Chrysler and General Motors Co. as essential to preventing a collapse of the auto industry, which would have severely damaged the Ontario economy. Mr. Flaherty said Monday that the governments will not get back all the money they lent or gave to Chrysler and GM.
On Friday, U.S. President Barack Obama toured a Chrysler plant in Toledo, Ohio, and praised the auto-industry turnaround. "This industry is back on its feet, repaying its debts, gaining ground," he told Chrysler workers.
Repaying the loans to all governments will save Chrysler $300-million (U.S.) in annual interest payments. Mr. Marchionne told reporters at the company's large car assembly plant in Brampton, Ont., on Tuesday.
"We're thankful," he said. "When the only lender in town is the government, you take it whichever way you can."
In return for the money, Chrysler pledged to maintain production at its two Canadian assembly plants. It invested more than $1-billion in Brampton to build a new generation of its flagship Chrysler 300 sedan and will spend more than $27-million to keep open a parts plant in Toronto that previous Chrysler owners had put up for sale for more than a decade.
The company reported a profit of $116-million in the first quarter - the first profit since its near-death experience - and jumped back into third spot in the vehicle sales race in the U.S. market in May.
With files from Reuters