Fiat SpA and partners bought most of Chrysler LLC's assets, creating the world's sixth-largest carmaker in Chief Executive Officer Sergio Marchionne drive to survive the recession by establishing a global presence.
Fiat, Italy's biggest manufacturer, will own 20 percent of the newly formed Chrysler Group LLC, the companies said Wednesday in a statement.
The combined company would have sales of 4.5 million vehicles globally, ranking just behind Ford Motor Co. based on 2008 results. Marchionne is pushing for consolidation in the auto industry because he expects only six global producers to survive the first global recession since World War II.
"Now management and investors can worry about delivering Fiat technology platforms and returning Chrysler to profitability," John Buckland, an automotive analyst with MF Global Securities in London, said before the announcement "Can Marchionne succeed where others have failed? It will be some years before any meaningful cash flow accrues to Fiat shareholders," said Buckland, who has a "sell" recommendation on the company's stock.
The purchase of Auburn Hills, Michigan -based Chrysler's assets is the first transaction toward Marchionne's goal of selling six million cars a year, the minimum he says is required to be profitable through the economic contraction. Chrysler, which shut its 22 US factories on May 1, didn't receive any other bids for its assets.
The acquisition transfers most of Chrysler's operations, excluding eight manufacturing sites, dozens of pieces of real estate, equipment leases and contracts with 789 US auto dealerships.
Fiat also made a non-cash offer in May for General Motors Corp.'s Opel and Vauxhall brands in Europe. Magna International Inc., Canada's biggest car-parts maker, was chosen at the end of last month as preferred bidder for the GM Europe division and is in talks on completing the takeover.
Chrysler filed for bankruptcy protection on April 30, using the reorganization to retain its strongest assets and form an alliance with Fiat. The US and Canadian governments are financing the Chrysler sale with $2 billion.
Fiat has the option of raising its stake to 35 percent once sales and earnings targets are met. The sale will allow the US carmaker to revive its Chrysler, Jeep and Dodge brands with less debt and lower wage costs.
The US Supreme Court overturned objections to the transaction by Indiana state pension funds and US consumer advocates, ruling Tuesday that the Chrysler creditors' challenges didn't meet the legal standard for an emergency stay of the deal.