Obama to seal Chrysler deal with Fiat CEO

Jun 3, 2011, 13:09 GMT

Washington - US President Barack Obama was due Friday to seal the government's sale of its remaining 6-per-cent equity in carmaker Chrysler to Italy's Fiat SpA for 500 million dollars.

Obama was to meet Sergio Marchionne, the chief executive of Fiat, at the company's Toledo Supplier Park, media reported, after the Italian company said it would seek to gain a controlling stake in the US company.

'After the completion of this transaction, Treasury will have fully exited its TARP investment in Chrysler Group LLC,' the US Treasury Department said Thursday in a statement.

TARP refers to the Troubled Asset Relief Programme launched by the US government to rescue firms on the edge of failing during the 2007-2009 recession.

The government still owned 6 per cent of Chrysler after the company last week repaid the remaining 7.6 billion dollars owed to the US and Canadian governments under the 2009 rescue package.

The deal also involves a payment by Fiat of 75 million dollars for proceeds from union holdings, which will be split 60 million dollars to the US and 15 million dollars to Canada.

Fiat has secured the rights to acquire shares held by US motor industry trade union UAW. The initial plan was to float these shares, but market observers speculate that Fiat may simply buy them off UAW - at an estimated cost of 4 billion dollars.

Chrysler Group, earlier this month reported its first positive results in two years, with a net profit of 116 million dollars for the first quarter. A rise in sales of its Dodge and Jeep vehicles helped boost its earnings.

In the rescue package, Chrysler was forced into bankruptcy and came out of the process under majority ownership by Fiat.

Marchionne, who took over Chrysler operations, said last week that the government support had given the company 'a rare second chance to demonstrate what the people of this company can deliver.'

'We owe a debt of gratitude to those whose intervention allowed Chrysler Group to re-establish itself as a strong and viable carmaker,' he said.

Chrysler is now estimated to be worth at least 8 billion dollars. Until recently, Marchionne had ruled out a complete takeover but may be rethinking this decision as the car industry recovers from the crisis.

Obama's move to bail out Chrysler brought political condemnation from opposition Republicans during his first months in office.

Treasury Secretary Tim Geithner said it was clear that Obama's 'decision to stand behind and restructure this company was the right one.'