The Italian Almanac
Fiat and Chrysler CEO Sergio Marchionne will proclaim an 'Independence Day' for the Italian-controlled US automaker following accords to repay bailout loans from the American and Canadian governments. Marchionne is set to make the announcement during a visit to the Chrysler plant in Sterling Heights, Michigan, which only two years ago faced the prospect of being shut down, as Chrysler teetered on the brink of bankruptcy, and is now producing a revamped version of the Chrysler 200 model.
Speaking on the eve of his announcement, Marchionne said "this will be the day we repay our debts, Chrysler will regain its independence and assume its responsibility on the market". Chrysler is able to repay some $7.5 billion to the US and Canadian governments by issuing $3.2 billion in bonds and taking out $4.3 billion in bank loans, while Fiat will chip in a further $1.3 billion from its own coffers. The operation means Fiat, which took an initial 20% and management control of Chrysler in 2009, will boost its stake in Chrysler to 46%.
It is expected to take an additional 5% stake, which would give it a 51% majority stake, without laying out additional cash, once it meets certain performance benchmarks including a 40-mile-per-gallon vehicle produced in the US with Italian technology by the end of the year. The US government will still be owed $2 billion but it will be able to recover much of this by selling an 8.6% stake it will still hold in the Detroit Number Three.
By restructuring its debt, Chrysler will save an estimated $300 million a year in interest payments. Until now it was paying an interest rate of 12% , which Marchionne had likened to those of a loan shark, that cost the company about 1.2 billion in 2010. Chrysler's 'Independence Day' comes at the end of the month which began with the automaker reporting its first quarterly net profit since it entered bankruptcy protection almost two years ago, a clear sign it was out of the woods.