Fiat S.p.A. can gain a controlling interest in Chrysler LLC only after it has repaid about $7.5 billion in new federal loans being made to Chrysler as part of the automakers history-making bankruptcy filing, senior White House officials said today.
Fiat has cemented an alliance with Chrysler, the officials confirmed. The Italian carmaker initially gets a 20 percent stake in Chrysler and management input by providing fuel-efficient engines and small and medium cars that Chrysler can sell through its dealers.
That stake can jump to 35 percent if Fiat reaches three milestones, the officials said. It has to help Chrysler sell more vehicles outside of North America, launch a fuel-efficient engine that would be manufactured in the United States and introduce a 40-mpg vehicle in the U.S. that also would be built here.
But to get equity control of the company, it has to repay loans that the U.S. Treasury Department has pledged to help a new Fiat-Chrysler emerge from Chapter 11 bankruptcy within 30 to 60 days.
Meanwhile, the plan calls for the UAW to get 55 percent of the equity in the new Chrysler and the right to one seat on the new board, but no voting rights, according to a fact sheet issued by the White House. The UAW controls an independent trust for retiree benefits that gets the share plus a $4.6 billion note payable over 13 years.
Treasury will provide $3 billion to $3.5 billion in debtor-in-possession financing so Chrysler can operate in bankruptcy and pay its suppliers, employees and meet other day-to-day obligations, the officials said.
The government intends to provide another $4.5 billion in exit financing so Fiat-Chrysler will have the money to operate normally once it leaves bankruptcy protection.
The government does not intend to run the restructured company, the officials said. It will, however, have some input in selecting independent board members.
The U.S. Treasury would own 8 percent of the new Chrysler, but does not intend to participate in the companys management.
The governments of Canada and Ontario will collectively own 2 percent and the right to name one director. For every $3 that the U.S. government is putting into Chryslers reorganization, the Canadian government will kick in another $1, denominated in Canadian currency.
The new Fiat-Chrysler partnership will have a nine-member board, a Fiat press release today said.
The board will be composed of four members selected by the U.S. Treasury, including three so-called independent directors. Fiat will pick three directors, two of which will be independent. The Canadian government also will get one seat.
The UAW will name one director. It got that spot as part of a deal whereby it took equity in lieu of cash for half of $10.6 billion that Chrysler owed to a UAW-administered trust to pay for retiree health care.
Fiat said that it will be able to add another director once it meets the milestones necessary to obtain a 35 percent stake in Chrysler.
Luca Ciferri in Turin, Italy, contributed to this report