Fiat Raises Chrysler Stake To 30%

Marchionne looking to eventually own more than half of the Detroit automaker.

After meeting benchmarks set by the U.S. federal government, Italian automaker Fiat increased its ownership in Chrysler Group LLC from 25% to 30% on Tuesday. Fiat's stake can rise to 35% once it begins production of a 40 MPG vehicle in the United States.

Fiat took over management control of Chrysler in 2009, when the American automaker underwent a government-funded bankruptcy. However, as a part of the takeover, Fiat received only a 20% stake in the company. The Italian automaker pledged no cash in the deal, but rather the promise to share billions of dollars worth of Fiat technology with Chrysler, and expand the international reach of the Auburn Hills, MI automaker into Central and South America, Europe and Asia. In order to increase actual ownership, Fiat must meet several criteria set by the White House in 2009.

Fiat was able to increase its stake to 30% as the company increased Chrysler vehicle sales outside of North America to more than $1.5 billion, compensated Chrysler for use of its technology and enrolled 90% of Fiat dealers in Europe and Brazil to sell Chrysler vehicles.

Producing a 40 MPG vehicle is the next benchmark to be met by Fiat, and CEO Sergio Marchionne (who runs both Fiat and Chrysler) has said that plans to do so are already in the works. Upon doing so, Fiat's stake will be allowed to increase to 35%.

Marchionne says that he wants to eventually increase Fiat ownership of Chrysler to 51%. In order to do so, though, Fiat must repay its loans to American and Canadian governments. The Fiat CEO has maintained that he expected repayment to happen in 2011. More recently, though, he said the loan repayment, as well as the initial-public-offering of Chrysler shares on the stock market, will be delayed until 2012.

Other owners of Chrysler Group LLC are a United Auto Workers retiree health care trust fund (59.2%), the U.S. government (8.6%) and the Canadian and Ontario governments (2.2%).

In the last year, Fiat has made huge progress in improving Chrysler vehicles such as Dodge Charger, Chrysler Town & Country minivan, Jeep Compass and Grand Cherokee and Dodge Durango. It has also recently launched the Fiat 500 mini-car in the U.S., with the idea of introducing more Fiats and Alfa-Romeo vehicles. Starting next year, the first Chrysler vehicles built on an adapted Fiat engineering platform will debut in U.S. dealerships.

View Gallery: The New Chrysler and Fiat Vehicles

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