FIAT Buys Chrysler

Recently Fiat announced that it will be purchasing the remaining equity interests in Chrysler Group, LLC from a United Auto Workers trust fund. As a result, Fiat will have full ownership of the United States car company and become the world’s seventh-largest automaker.

In a recent statement, Fiat reported that it will pay $4.35 billion to obtain the company’s remaining equity interests in Chrysler. The company intends to use $1.75 billion in cash towards the purchase. In addition Chrysler will fund $700 million to the UAW’s trust during the next four years and in return the UAW has agreed to back the automaker’s future projects. The Initial Public Offering will give Fiat more resources and allow them to finance new technology and vehicle models similar to the Fiat 500 Abarth.

When Chrysler faced its financial crisis several years ago, the Obama administration brokered an agreement with Fiat to keep the company in business. Once Fiat began managing Chrysler, the American automaker regained its profitability. The company’s sales and market shares have been growing ever since. In fact, Chrysler is predicting that its 2013 sales will total at least 2.6 million vehicles worldwide, which is 18 percent higher than the company’s sales figures for 2012. During the first year that Fiat was in control of Chrysler, the American automaker’s sales grew by more than 70 percent.

The United States government bailed Chrysler out when the company was forced to file for bankruptcy. Therefore, the automaker agreed to give some of its shares to the government for compensation. In 2011, the U.S. permitted Chrysler to buy back its shares for a loss. Once Chrysler began making a comeback, Fiat’s shares gained an estimated 13 percent in Milan and traded at €6.70, which is its highest point since the summer of 2011. After Fiat completed the deal to buy Chrysler, the company’s chairman, John Elkann, said, “I have been looking forward to this day from the very moment that we were chosen to assist in the rebuilding of a vibrant Chrysler back in 2009.” The deal is set to completed on January 20, 2014.