There’s a major merger in the works for a small-car company.
On January 1, Fiat, the Italian auto manufacturer known for their powerfully small 500 series cars, announced it is buying the remaining 41% stake in Chrysler from the United Auto Worker’s VEBA Trust. The move will cost Fiat SpA $435 billion for the piece of Chrysler Group LLC’s stake, creating the world’s seventh-largest automaker in the process.
Since the Michigan-based Chrysler declared bankruptcy in 2009, Fiat and the UAW retiree health-care trust have shared ownership of the company, with Fiat holding a 58% share. They had been trying to acquire the rest for years but the two sides haggled over what it was ultimately worth. Back in September, Chrysler filed documents for a planned public stock offering, a tactic they used to try and convince Fiat to give them more cash for the remaining shares. At the time, Sergio Marchionne, who acts as chief executive for both companies, warned Fiat may abandon their partnership with Chrysler all together as a result of the move, but fortunately it didn’t come to that.
Now, Fiat will pay the trust $1.75 billion in cash and Chrysler will contribute $1.9 billion through a dividend to complete the transaction. The deal should be closed by January 20.
“In the life of every major organization and its people, there are defining moments that go down in the history books,” said Marchionne. “For Fiat and Chrysler, the agreement just reached with the VEBA is clearly one of those moments.”
One question that lingers though is what the move means for each company’s alternative energy vehicles. As it stands now, Fiat has a 500e model electric car that sells limitedly (and, as Kelley Blue Book pointed out, doesn’t retain a large majority of its re-sale value over five years) and Chrysler/Jeep offers a 3.0-litre V6 clean diesel Grand Cherokee and Ram 1500 pickup. There are plans in place to put more diesels on the market from Chrysler in the future.
The merger could actually push Chrysler to get a hybrid under its name sooner rather than later. Back in 2011, Chrysler announced plans for a hybrid but Marchionne said they would only pursue that venture to keep up with government efficiency mandates.
So whether Fiat will use their research on hybrid technology to improve Chrysler’s roster with energy-efficient options or if their hybrid movement falls to the wayside remains to be seen. But it would be a major power move from Fiat to put out the first hybrid under the Chrysler banner.