TURIN, Italy -
As 2010 draws to a close, apparently questions have arisen about what Fiat needs to accomplish to increase its stake in Chrysler.
 
Fiat already holds a 20-percent stake in Chrysler under the Chrysler-Fiat Industrial Alliance established as part of the process of Chrysler coming out of bankruptcy. According to the alliance agreements, Fiat can gain an additional 15 percent in Chrysler if certain requirements are met.
 
Fiat explained on Thursday that these gains can be achieved through three separate performance events.
 

The first event can occur when Chrysler receives regulatory approval for an engine based on the Fiat FIRE family for assembly in the U.S. and Chrysler commits to production.

Meanwhile, the second performance event can come when Chrysler records revenues of $1.5 billion outside NAFTA and also enters into agreements for the distribution of certain Chrysler products in the Latin America region.

As for the third performance event, Fiat said it can receive the third installment of 5 percent more interest in Chrysler when the automaker receives regulatory approval for a vehicle based on Fiat platform technology with at least 40 combined mpg. Chrysler also needs to commit to commercial assembly in the U.S. of this model.

The Italian automaker emphasized that for each performance event that has not occurred by January 2013, Fiat may acquire each of the 5 percent equity tranches through a primary call option.

Moreover, Fiat has the chance to use a second primary call option to acquire up to a 15-percent higher stake in Chrysler’s equity; however, Fiat can not surpass the 49-percent stake mark until both the U.S. and Canada has been paid back bailout funds. 

The latter call options can be exercised between January 2013 to June 2016.

“The consideration to be paid for the exercise of these two options is determined on the basis of an EBITDA multiple — average multiple of reference automakers, not to exceed the Fiat multiple,” Fiat officials explained.

“In the event that at the time of exercise Chrysler is a listed company, such consideration will be based on a market trading price,” they added.

For full details of the alliance agreements and what Fiat needs to do to increase its stake, visit www.financialstability.gov/roadtostability/autoprogram.html.