Fiat’s Chrysler stake would grow as benchmarks met

Fiat SpA would expand its ownership of Chrysler from an initial 20 percent to as much as 35 percent as certain key goals are met. While Fiat cannot have a majority of Chrysler until government loans are repaid, the shares would make Fiat the largest stakeholder in the Detroit automaker.

According to sources familiar with the negotiations between the two automakers, the incremental growth in Fiat’s piece of the pie would happen as follows:

1. When the first Fiat engine is certified by the U.S. government, share would grow to 25 percent.

2. When the first Fiat-based vehicle enters production in the U.S., Fiat’s stake would grow to 30 percent.

3. When the first U.S.-built vehicle based on Fiat technologies is exported, Fiat would become owner of 35 percent of Chrysler.

Both sides are confident details of the alliance can be worked out before the April 30 deadline set by the Obama Administration but that this is only one of the requirements Chrysler must meet to qualify for up to $6 billion in government-backed loans.

Questions are already being raised about the sufficiency of the additional money to get Chrysler through the downturn in light vehicle sales and Fiat is also looking at a potential cash shortage and its bond ratings have been cut to junk levels. This is on top of serious reservations about Chrysler’s ability to negotiate substantial concessions from its bankers and the UAW in the next 22 days.

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