Fiat could gain majority control of Chrysler as early as this year, the CEO of both companies said Monday, advancing his plans to create a global automaker just as he achieved another key milestone: the separation of Fiat's industrial and automaking businesses.
"I think it is possible, I 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," Sergio Marchionne told reporters at the stock exchange as Fiat Industrial began its trading life as an independent entity.
Fiat took a controlling 20-percent share in Chrysler LLC in 2009, after Chrysler emerged from bankruptcy, in exchange for small-car and clean-engine technology, as well as management know-how. It expects to meet three milestones, each yielding another 5-percent share, to raise its total share to 35 percent this year.
In order to get to 51 percent, Fiat would have to repay Chrysler's loans from the U.S. and Canadian governments.
UBS analyst Philippe Huchois said that is "very likely," anticipating repayment as early as the second quarter. That, he said, would allow Fiat to buy the 16-percent share it needs at a discount over what it will likely go for once Chrysler resumes public trading.
Huchois said it would be contingent on Chrysler's refinancing a portion of the $6.9 billion it owes to the U.S. and Canadian governments, which would create savings in long-term interest. He expected Chrysler would refinance all but $2 billion, which comes due in October.
"They need to find banks willing to lend money," Huchois said, adding that the improving U.S. auto market should help prospects.
Marchionne's next corporate move will be to get Chrysler back on the U.S. stock exchange, which he confirmed was likely in the second half of 2011. Analysts expect the companies to eventually merge, although Marchionne repeated Monday he has no immediate plans to do so.
"A legal merger is not going to change our life," Marchionne said, adding that the two companies are already integrated industrially.
The unwinding of Fiat Industrial — which includes CNH agriculture and construction vehicles and Iveco trucks — marks a historic shift for the 111-year-old automaker, Italy's largest industrial concern and employer. It is a key step toward achieving Marchionne's goal of creating a global automotive player with Chrysler to build 6 million cars a year by 2014.
Fiat Industrial opened at 9 euros ($12.03) on the Milan Stock Exchange before dipping to 8.82 euros, while Fiat SpA — which includes Fiat Group Autos plus Maserati and Ferrari — opened at 7.10 euros, hitting a minimum of 6.90 euros before reaching 7.03 euros.
The combined company closed Thursday at 15.43 euros — shy of its five-year highs above 23 euros in mid-2007 but well above lows under 4 euros in early 2009 as global markets slumped.
Marchionne said the new operation will allow each of the businesses to operate with more clarity, and give them greater agility to seek alliances. Fiat has forecast the new auto company will have revenues of 64 billion euros by 2014 while Fiat Industrial revenues will be 29 billion euros.
"This is a very important moment for Fiat, because it represents at the same time a point of arrival and a point of departure," Marchionne said at an opening ceremony at the stock exchange. "Faced with the great transformations in place in the market, we could no longer continue to hold together sectors that had no economic or industrial characteristic in common."
Marchionne has said he is on the lookout for alliances that will help each of the industrial and auto businesses thrive. He repeated on Monday that he does not need to sell assets to keep the businesses going, and has shrugged off Volkswagen's expressions of interest in the struggling Alfa Romeo sports car brand, which he plans to launch in the United States. On the industrial side, potential partners include Daimler.
Marchionne's ambitious plans to come out of the world economic crisis as a mean-and-lean global competitor has run into some labor resistance in Italy, where he wants to improve lagging productivity.
Fiat has reached deals for more flexible work rules in two key plants — Pomigliano near Naples and the historic Turin plant Mirafiori, clearing the way for euro2 billion in investments.
Marchionne has made the more flexible work contracts — which, for example, add shifts and make it more difficult to strike during full production — a condition for his plans to invest a total 20 billion euros in Italy and double auto production. Much of that would be badly needed exports.
Marchionne has promised to raise salaries to reflect improved production. But that has not persuaded one union holdout, FIOM, which says the plant-by-plant negotiations are undermining Italy's system of national contracts.
While the deal for Pomigliano — where Fiat will make new Pandas — has been formalized over FIOM's objections, the agreement in Mirafiori still faces a worker referendum later this month. FIOM has announced an eight-hour strike on Jan. 28 to protest the new contracts.
Marchionne has announced a joint venture at Mirafiori to build Alfa Romeo and Jeep brand vehicles, the first overseas expansion for Chrysler under Fiat's stewardship.
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