Fiat to increase stake in Chrysler

July 6, 2012 12:00 AM

The Italian automaker Fiat already owns a controlling stake in Chrysler, having bought a significant portion of the automaker during the recession and later buying the parts of the company that the U.S. and Canadian government received after the bailout. Now, Fiat plans to increase its stake even more, according to The Detroit Free Press.

Fiat will increase its current stake of 58.5 percent to 61.5 percent by purchasing shares from the United Auto Workers Retiree Medical Benefit Trust. The trust pays health care benefits to retirees of the UAW. However, the trust needs to sell its share of the company in order to receive cash to actually pay the benefits.

Fiat's eventual goal is to completely merge with Chrysler and run everything as one company. As it stands, Fiat controls all of Chrysler's operations, but the two companies aren't officially merged. Fiat also needs to increase its stock in order to hold an initial public offering.

Since Chrysler isn't publicly traded, the shares have no set price. Instead, the U.S. government has defined the price as a multiple of Chrysler's recent earnings - meaning that the price for Fiat will rise as Chrysler improves its performance.

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