Fiat SpA (BIT:F) (BIT:FP) (PINK:FIATY) Italy’s biggest carmaker, announced on Tuesday that it would buy another 3.3% stake in Chrysler Group, increasing its total holding from 58.5% to 61.8% in the American automaker. Fiat CEO Sergio Marchionne added that his company has enough cash to buy the remaining stake in Chrysler, but it’s not the right time.
Though Fiat didn’t disclose the amount it paid for the additional stake, people close to the matter said the price for 3.3% holding could be in the range of $250-$300 million. The transaction gives Chrysler a net valuation of $9 billion.
Fiat bought the stake from a trust fund called the Voluntary Employee Beneficiary Association (VEBA), which offers health care for retired workers. VEBA reduced its stake from 41.5% to 38.2%. So far, Fiat has invested $2.3 billion for its stake in Chrysler.
“Fiat has the intention to get to 100 percent of Chrysler even if talks with VEBA are not in an advanced stage,” said Emanuele Vizzini, chief investment officer at Investitori Sgr in Milan. “North America, with Brazil, is crucial for Fiat as Europe is worrisome.”
Fiat is increasingly relying on Chrysler as fiat sales decline in Europe due to sovereign debt crisis. Chrysler continues to regain the ground in the US market. Chrysler has made heavy cuts in its production before it went bankrupt in 2009. Chrysler is expected to make a profit of $3 billion in 2012, and without Chrysler, Fiat would have incurred losses in the first quarter.
The US sales of Chrysler grew 20 percent in June to 144,811 vehicles. The demand is growing steadily despite the shaky economy. In contrast, Fiat sales in Italy fell 23.48 percent in the same period. The sales of all the leading brands including Alfa Romeo, Fiat and Lancia declined. The company’s plants in Italy are manufacturing much below their full capacity.
Fiat shares rose 2.8 percent to 4.04 Euros in Milan trading. The Italian carmaker’s stock has gained 13 percent this year, giving the company a valuation of 5.01 billion euros.