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Fiat buys Treasury's stake in Chrysler for $500 million

Consumer Reports News: June 03, 2011 12:23 PM

The Treasury Department announced yesterday that it had agreed to sell its stake in Chrysler to Italian automaker Fiat for $500 million, ending its involvement in overseeing Chrysler after helping to keep the car maker afloat following it's bankruptcy in 2009.

President Obama is expected to formally announce the deal today during his visit to a Chrysler plant in Toledo, Ohio.

The deal is contingent on regulatory approval and could take one to three months to close, according to the Treasury Department press release.

The transaction also includes an additional $75 million for the rights to buy the UAW retiree fund’s 41 percent stake in Chrysler. Of that amount, $60 million will go the U.S. and $15 million will go to Canada.

Last week, Fiat purchased 16 percent of Chrysler for $1.3 billion, valuing the company at $8 billion. The U.S. Treasury currently owns six percent of Chrysler on a fully diluted basis.

With the deal, Fiat would own 52 percent of Chrysler. Fiat Chief Executive Officer Sergio Marchionne said the company expects to receive an additional 5 percent stake by the end of the year in return for developing a fuel-efficient vehicle for Chrysler.

Fiat is also reportedly in talks with the Canadian government to obtain its 1.7 percent stake in Chrysler, according to Bloomberg. Doing so would make Fiat and the UAW retiree fund the only remaining shareholders in Chrysler.

Last week, Chrysler repaid $7.5 billion in loans and interest it owed the U.S. and Canada. The company initially borrowed $5.1 billion from the U.S. and $1.6 billion from Canada in June 2009 as it teetered on the brink of collapse.

Evan MacDonald

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