Fiat Raises Stake in Chrysler to 25 Percent

Fiat Raises Stake in Chrysler to 25 Percent

With Chrysler having met its first performance related target, in reference to the turnaround plan instigated by CEO Sergio Machionne, Fiat has now raised its stake in Detroit’s number three automaker from 20 to 25 percent.

The increase comes on the announcement that Chrysler has been granted approval to produce versions of Fiat’s FIRE (Fully Integrated Robotized Engine) series of small passenger car engines in the U.S., at its facility in Dundee, Michigan. These will be used to power the North American market Fiat 500 and possibly other small Chrysler vehicles.

Fiat is expected to increase its stake by another 10-15 percent this year, provided Chrysler meets some additional milestones, including sales growth in markets outside of North America and building a vehicle that gets more than 40 miles per gallon.

Marchionne also said that he’d like to have the loans that Chrysler secured from the U.S. and Canadian governments, repaid this year  – the current face value of these debts is around $7.46 billion. Doing so will then allow Fiat to acquire as much as a 51 percent controlling interest in Chrysler, before any Initial Public Offering of shares can begin, slated to possibly happen in the latter half of 2011.

[Source: Business Week]