Word: fiats
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...auto industry crisis was beginning to look complicated, the latest news from Chrysler is sure to make it a head spinner. The deal announced this week not only gives Italy's Fiat S.p.A. a flexible stake in Chrysler, but turns the ultimate control of the automaker into the financial equivalent of a five lane roundabout...
Chrysler is nominally controlled by Cerberus Capital Management, which acquired an 80.1% stake in the company from Daimler AG in August, 2007. Fiat will get 35% of Chrysler under terms of the yet-to be finalized deal. The terms also grant Fiat the option of raising its stake to 55%. (See three Fiats you might like owning...
Cerberus is already slated for dilution under the terms of the government bridge loan, agreed to in December. The bridge loan gives the U.S Treasury warrants to purchase 5% to 15% of the Chrysler shares now in the hands of Cerberus. Fiat will eat further into the Cerberus stake, and it also has the option of tapping into Daimler AG's remaining stake in Chrysler as a way to build its stake to 55%, according to Rebecca Lindland of the consulting firm of Global Insight...
...Chrysler is forced to declare bankruptcy, Fiat would be protected from losses and might even be able to acquire American assets at favorable prices in the shakeout. A senior Fiat official calls Tuesday's signature "just a start," noting that much will depend on how the U.S. auto bailout proceeds under the new Obama Administration. "This is still far from a done deal," says the official. "We've already said that with the current situation in world markets, there needs to be major consolidation in the car business, and as we've shown today, we'd like to be part...
Marchionne has recently talked about the company's becoming something of an Intel of the auto industry, providing key component parts to other car manufacturers. There are also rumors that he wants to build a $3,500 model Fiat Punto that could reconfigure the concept in the West of an economy car. But whether or not he's Chrysler's savior or the man to revolutionize the entire industry, Marchionne seems to have proved again that he knows how to strike a hard bargain: Fiat has landed 35% of Chrysler without spending a dime...