Fiat, in Deal With Union, Will Buy Rest of Chrysler
DETROIT â€" Chrysler, the smallest of the three American automakers, is set to be completely absorbed by an Italian company, Fiat.
Sergio Marchionne, chief executive of Fiat and Chrysler.
Fiat said on Wednesday that it had reached an agreement to take full ownership of Chrysler in a $4.35 billion deal with the United Automobile Workers retiree health care fund.
Fiat and the U.A.W. trust have shared ownership since Chrysler emerged from bankruptcy in 2009. The deal to buy out the trust’s 41 percent stake will make Fiat the world’s seventh-largest automaker.
“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 â€" a solid and open organization that will ensure all employees a challenging and rewarding environment,†Sergio Marchionne, chief executive of Fiat and chairman and chief executive of Chrysler Group, said in a statement Wednesday.
The agreement, which is expected to close on Jan. 20, will allow the carmaker and the union to end months of negotiations over the value of the U.A.W.’s stake. Union leadership had been pressing to force a public stock offering to cash out its shares on the open market amid arbitration in a Delaware court over the value of the trust’s stake.
Mr. Marchionne, who became Fiat’s chief executive in 2004, has been clear about his ambitions to create a company with a global scale to challenge the world’s leading automakers: General Motors, Volkswagen and Toyota. Fiat has held the majority stake in Chrysler since 2009 and has made no secret about wanting to acquire the remaining stake.
Fiat will pay the trust $1.75 billion in cash, and Chrysler will make a $1.9 billion contribution. Chrysler also agreed to pay the trust $700 million over four annual installments once the sale closes.
U.A.W. officials did not comment on the deal on Wednesday.
The merger will help both companies operate with a single set of financial statements, said Jack R. Nerad, the executive editorial director at Kelley Blue Book. “Their ability to move capital around is going to be a big advantage for them,†Mr. Nerad said.
The deal that awarded Fiat a 58.5 percent stake in Chrysler and the remainder to the union’s voluntary employee benefits association was a cornerstone of the Obama administration’s restructuring of the American auto industry in the recession.
“I have been looking forward to this day from the very moment that we were chosen to assist in the rebuilding of a vibrant Chrysler back in 2009,†said John Elkann, chairman of Fiat.
The agreement to pay $1.75 billion to the U.A.W. means that Fiat will have paid a total $3.7 billion to acquire Chrysler, much less than the $36 billion Daimler-Benz paid for the company in 1998 or the $7.4 billion Cerberus Capital Management paid to acquire an 80 percent stake in 2007.
Chrysler’s sales have soared recently with the success of new models including the Jeep Grand Cherokee, Ram pickup truck and Dodge Dart compact car. The company reported a quarterly profit during the first quarter of 2011 for the first time in five years, and repaid its government loans early.
Chrysler’s overall sales in the United States rose 9.3 percent through the first 11 months of the year, as the Fiat brand, still a fledgling here, fell 1.4 percent. The Ram brand has been a bright spot for the company, with sales rising 22.9 percent through November. The Ram pickup truck is the fourth-best-selling vehicle in the United States.
Together, Fiat and Chrysler sold 4.5 million vehicles globally in 2012, according to OICA, an international organization of vehicle manufacturers. Toyota is the world’s largest automaker, having sold 10 million vehicles, followed by General Motors, Volkswagen, Nissan-Renault, Hyundai and Ford. The merger will put Fiat and Chrysler just above Honda in size. Â
Though Chrysler and Fiat have shared for years such resources as product development teams, and such production assets as single platforms that can be used to build several models, consolidated ownership will allow the company to move forward more smoothly, Mr. Nerad said.
The geographic diversity in the markets covered by Chrysler and Fiat will be a boon to the merger, he added.
“Often, one global market will be up while another’s down,†he said. “If you’re stuck in a single region, it can be a disadvantage to compete against global players.â€
This article has been revised to reflect the following correction:
Correction: January 2, 2014
An earlier version of this article misstated the company that bought Chrysler in 1998. It was Daimler-Benz, not Daimler-Chrysler.
A version of this article appears in print on January 2, 2014, on page B1 of the New York edition with the headline: Fiat, in Deal With Union, Will Buy Rest of Chrysler.