Some people choose to rest on New Year’s Day, but not Fiat CEO Sergio Machionne; the Italian automaker and the United Auto Worker’s union (UAW) made a strong welcome to the new year announcing an agreement to give complete control of Chrysler to Fiat.
Fiat’s takeover bid of Chrysler started in 2009 when the Italian company helped pull out the US carmaker with a 20% ownership acquisition and slowly paying off the latter’s bailout loans. The Italian company also increased its ownership the following years with US-government hurdles in place.
The new deal involves the 41.46% minority stake at Chrysler held by the UAW’s retiree trust fund called VEBA. The purchase was subject to disagreement over the pricing the union wanted for their minority share of the US automaker. The shares were on the brink of a possible IPO had the deal fallen through; a situation Marchionne warned would be difficult for the two automakers to work in synergy.
The new agreement sees Fiat paying UAW $1.75 billion from its own pockets with Chyrsler paying $1.9B; making it a total of $3.65 billion up-front for the union. A remaining $700 million in 'contributions to the trust' will be split into four annual installments of $175 million once the merger has been completed. While higher than what the Italian automaker had hoped, the purchase price is still significantly lower than the original figure the union wanted, which was over $5 billion.
Fiat Chairman John Elkann and Marchionne emailed employees immediately after the announcement asking for unity, support and giving assurances stating:
"Today marks the beginning of the next chapter in our future.
We ask that you remain united, that you continue with the same spirit of mutual respect and cooperation that has brought us to where we are today.
We remain committed to the continued development of Fiat-Chrysler in every part of the globe, ensuring it is a model of speed and efficiency.
At the same time, we also remain committed to ensuring you all a secure and challenging future in an organization where the sharing of experiences and cultures provides abundant opportunity for professional and personal growth."