Fiat reaches deal with UAW trust to buy rest of Chrysler

[Eugene]

Source: Reuters

MILAN/DETROIT Wed Jan 1, 2014 3:15pm EST

(Reuters) - Italian carmaker Fiat SpA said on Wednesday it has signed an agreement to buy the stake in U.S. automaker Chrysler Group LLC it does not already own, ending months of tense negotiations and allowing Chief Executive Sergio Marchionne to pursue his goal of creating the world's seventh-largest auto group.

Fiat will acquire the 41.46 percent stake in Chrysler from a retiree healthcare trust affiliated with the United Auto Workers union, which will receive $3.65 billion in cash for its stake. Additionally, once the deal closes, Chrysler has committed to giving the trust an additional $700 million.

The deal is a victory for Marchionne, who wants to merge Fiat and Chrysler and create a more competitive automaker with a broader global reach. But he has been at odds with the UAW trust for more than a year over the value of Chrysler.

Chrysler will contribute $1.9 billion in cash, while Fiat will put up $1.75 billion to buy out the trust, which is known as the VEBA, both companies said in separate news releases.

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Read more: http://www.reuters.com/article/2014/01/01/us-fiat-chrysler-veba-idUSBREA000FK20140101

[dipsydoodle]

1. Does that include Jeep ?

.

[sabbat hunter]

2. yes

Jeep is a brand of the chrysler corporation.
It is a division, not a separate company.

[civillawyer]

3. What does this mean?

In the big picture of things. Does labor benefit? What about the taxpayer's stake in the bailout?

[okaawhatever]

4. It had already paid back the loans. It paid Canada back completely and the US back for all

but 1.3 billion. Not that that isn't a lot of money, but considering we'd have lost a lot more if all those people were out of work I'd say it's a win. I think Obama could have held onto the shares a little longer and gotten back the rest but the government needed the cash.

[civillawyer]

5. Thanks

But I was wondering if the taxpayers saved Chrysler, only to have it eaten up another company. Seems like the taxpayers (including those who's jobs were saved) got the short end of the long term investment. Poorly written I know. It's late.

[okaawhatever]

6. Chrysler was owned in part by a private equity firm Cerebus capital management and they were losing

money. Cerebus put a guy in charge who doesn't seem that talented. His name is Bob Nardelli. Here is more info on him from deal book:

For now, the move halts Mr. Nardelli's career as a senior corporate manager. He was a General Electric executive who came up short in the competition to succeed John F. Welch Jr. In December 2000, he took the reins of Home Depot. Some six years later, he resigned after the home improvement retailer struggled with slowing financial performance and complaints about his heavy-handed management style.

Later in 2007, Cerberus hired him as the chief executive of Chrysler, which the firm had purchased from Daimler. But he was unable to turn around the carmaker and grapple with its huge debt, prompting Chrysler to file for Chapter 11 with financial support from the federal government. Mr. Nardelli left the company after it re-emerged from bankruptcy protection.


I wonder if Cerebus ever planned to turn Chrysler around or just wanted to gut it for cash and some of it's other assets. Now the line is making money and the new owner has reached an agreement with the union. He wants to expand the company so hopefully there will be ore jobs here in the US. For the gov't to keep it's shares in Chrysler when it was losing money wasn't a good idea. This is the best of two evils, but if the automaker stays in business and the jobs stay here it will be more than worth it.

[civillawyer]

7. Good Post

I think you touched on my possible concern.