Report: Fiat Group May Raise its Chrysler Stake from 20% to 51%

Italian carmaker Fiat may increase its stake in the Chrysler LLC group from 20 per cent it owns today to 51 per cent before an initial public offering (IPO) by the U.S. automaker, the firm's chief executive officer, Sergio Marchionne, told reporters at the Milan stock exchange today after the first listing of Fiat Industrial, which includes the group's non-automotive related assets.

“I think it is possible, don’t know whether it is likely, but it is possible that we go over the 50 percent if Chrysler decides to go to the market in 2011,” said Mr. Marchionne. "There will be an advantage if that happens."

The Fiat Group, which acquired a 20 per cent stake in Chrysler in 2009 saving the company from bankruptcy, has the option to buy another 15 per cent this year when the Detroit automaker begins manufacturing a small engine in the U.S. and meets sales targets outside of North America, as well as an additional 16 per cent after Chrysler repays U.S. and Canadian government loans.

Analysts believe that it would probably cost less money for Fiat to increase its Chrysler stake now than if it were to do it after the listing. “It looks cheaper for Fiat to get 51 percent of Chrysler before the IPO,” said Philippe Houchois, a London-based analyst at UBS AG. Mr. Houchois told Businessweek that Fiat could save anywhere between $1 billion to $2.7 billion if the Italian company exercises the option before a Chrysler listing. “It’s a positive scenario for Fiat shares.”

Mr. Marchionne also pointed out that there is currently no plan to merge Fiat and Chrysler. “A legal merger is not going to change our life,” he said.

Source: Businessweek