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post #1 of 4 (permalink) Old 05-09-2011, 11:12 AM Thread Starter
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Fiat Option: Chrysler Stake 70% Plus

Fiat Has Options to Increase Chrysler Stake to More Than 70%

May 8, 2011

May 9 (Bloomberg) -- Fiat SpA has options to increase its stake in Chrysler Group LLC to more than 70 percent as the U.S. government seeks to exit its investments in the auto industry.

Fiat has an option for 12 months to buy the U.S. Treasury's remaining stake after it repays debts to the government, Chrysler said today in a filing with the U.S. Securities and Exchange Commission. Chrysler said in April it would issue new debt to repay the government loans, allowing Fiat to exercise an option to increase its stake to 46 percent from 30 percent.

The Treasury holds an 8.6 percent stake in Chrysler, the company said April 12. That amount would be reduced when Chrysler meets the final of three performance milestones that each give Turin, Italy-based Fiat an additional 5 percent stake.

The final goal, to build a vehicle that gets 40 mpg in the U.S., should be met this year, Sergio Marchionne, chief executive officer of both automakers, has said.

Fiat also holds an option to acquire 40 percent of the original stake held by United Auto Workers union retiree health- care trust, Auburn Hills, Michigan-based Chrysler said. The option is exercisable from July 1, 2012, to Dec. 31, 2016, and in amounts of as much as 8 percent in any six-month period, according to the filing.



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post #2 of 4 (permalink) Old 05-10-2011, 07:33 AM
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Does anyone know if the government will lose $ when they sell to Fiat? I've read that the government will still lose billions when they dump the rest of GM. How about this: now that GM is making $ (supposedly - you know how they cook the books) how about paying back some of the $ to the folks that got shafted in all of these deals? My 2c.




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post #3 of 4 (permalink) Old 05-10-2011, 08:57 AM Thread Starter
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Quote:
The Treasury Department said Monday it will lose $1.6 billion on a loan made to Chrysler in early 2009. Taxpayer losses from bailing out Chrysler and General Motors are expected to rise as high as $34 billion, congressional auditors have said.
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Treasury officials said that the government had no plans to boost its stake in the new Chrysler to cover those losses. It also acknowledged another $1.9 billion in potential losses from a separate loan that had been made to the company that went through bankruptcy proceedings. It indicated slim hopes of recouping much if anything from that separate $1.9 billion loan.

The original $4 billion loan was made in January 2009, when the Bush administration was scrambling to rescue Chrysler, GM and their auto financing arms.
SOURCE in 2010

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post #4 of 4 (permalink) Old 05-10-2011, 09:18 AM Thread Starter
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Chrysler, which was saved by a government bailout financing package, is going to repay its loans to the U.S. and Canada.

Like a homeowner seeking lower mortgage interest, Chrysler plans to refinance the loans for billions of dollars that the U.S. and Canadian governments provided to the automaker to reorganize in Chapter 11 bankruptcy in 2009 rather than forcing it to go out of business.

Chrysler said Thursday that it wants to lower its interest expense by taking out bank loans and selling debt this quarter to repay $5.8 billion it owes the U.S. Treasury and $1.7 billion it owes Canadian government entities.

The three U.S. Treasury loans carry interest rates of 7.22%, 12.16% and 14.33%. The Canadian loans are at 7% and 20.57%, Chrysler says. Easy to see why the car company thinks it can do better. The automaker wouldn't say what it expects the interest rate to be after the refi.

Paying off the loans would clear a hurdle set by the government before Italy's Fiat could buy an additional 16% stake in Chrysler. Fiat owns 30% of Chrysler and said last week it would pay $1.27 billion for the 16%. That would cut the U.S. government's stake in Chrysler from 9.2% to 6.6%. The remainder would come from stakes held by Canada and the UAW union.

The refi also would help make it possible to get U.S. Department of Energy low-interest loans to develop fuel-efficient vehicles and overhaul factories to build them.

Fiat and Chrysler CEO Sergio Marchionne have said he wants Fiat to own 51% before Chrysler makes an initial public offering. Fiat initially got 20% and control in the government-sponsored Chapter 11 bankruptcy for a promise to provide Chrysler with fuel-efficient vehicles and technology. It got 10% more by meeting two other goals, and will get a final 5% when it begins building a 40 mpg vehicle in the U.S..
Both the U.S. and Canada has made money on these LOANS that would reduce the non-loan loss on the 1.9B to the US, as you can see from the large interest rates charged to Chrysler, not to GM?

Fiat chief Sergio Marchionne, who also runs Chrysler, said last month that Chrysler appreciated the bailout but wants to end its relationship with the government as quickly as possible. One reason is the punishing interest rate on the government loans, which cost Chrysler $1.2 billion last year.


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