Fiat put the final touches on its acquisition of the US car maker Chrysler Wednesday, buying the remaining 41.5-per-cent stake that was owned by a union health plan and staking its claim as a global rival in the market.
The acquisition from the United Auto Workers retiree health-care trust for $4.35 billion represents the final step to full ownership by the Italian car maker less than five years after Chrysler went bankrupt.
Fiat head Sergio Marchionne and the rest of Fiat management have been looking forward to this day since US President Barack Obama tapped Fiat to help rescue the flailing car maker in 2009.
Marchionne said the final acquisition was a “defining” moment for Fiat and Chrysler.
“The unified ownership structure will now allow us to fully execute our vision of creating a global automaker that is truly unique in terms of mix of experience, perspective and know-how,” Marchionne said.
While Fiat’s main market is in Europe and Latin America, Chrysler, the third largest car maker in the United States, has a strong foothold in the North American market. The combination gives Fiat a strong position as a rival to Volkswagen, General Motors and Ford.
The Fiat-Chrysler brands include Alfa Romeo, Lancia, Abarth, Jeep, Dodge and Ram.
Fiat got involved with Chrysler in 2009, as the world was reeling from the worst financial crisis since the 1929 crash and the two largest US car companies, General Motors and Chrysler, faced bankruptcy.
While GM was helped by massive government involvement, the Obama administration decided that Chrysler was in too much trouble to help.
It decided to allow Fiat to get involved and bring to struggling Chrysler its technical know-how.
The partnership has paid off despite naysayers’ projections: Chrysler has been turning profits for more than two years, which has helped Fiat to survive the downturn in the European car market.
The Autoworkers’ union had received the 41.5 per cent ownership in exchange for its concessions during the bankruptcy proceedings. Fiat and the union have been negotiating for months over the final step of acquisition but could not agree on price. At one point, Chrysler considered turning to the stock market for cash.
The health-care trust will receive $1.9 billion from Chrysler’s cash reserves, and Fiat is to pay another $1.75 billion when the transaction is completed by January 20 at the latest. The health fund will also receive another $700 million in annual payments over four years.