Obama touts sale to Fiat of Chrysler stake

By Anne Walters Jun 3, 2011, 22:34 GMT

Sergio Marchionne (C), Chief Executive Officer, Chrysler Group LLC applauds US President Barack Obama at Chrysler Group LLC Toledo Supplier Park in Toledo, Ohio USA on 03 June 2011. Fiat SpA agreed late 02 June to acquire the U.S. Treasury\'s stake in Chrysler for $560M, ending the Obama administration\'s involvement with the Auburn Hills, Michigan USA automaker. EPA/JEFF KOWALSKY

Washington - US President Barack Obama praised Friday a deal to sell the remaining government share of Chrysler to Italy's Fiat, speaking to a cheering crowd in Ohio that included Fiat head Sergio Marchionne.

'Soon Chrysler will be 100 per cent in private hands. Early. Faster than anybody believed,' Obama told autoworkers at the plant in Toledo, Ohio.

The president defended the government's decision to bailout Chrysler and rival General Motors in order to save the industry and 1 million jobs - a decision early in his term that drew fire from opposition Republicans.

'Today I'm proud to announce the government has been completely repaid for the investments we made under my watch,' the president said.

The US agreed Thursday to sell its remaining 6-per-cent equity for 500 million dollars, giving Fiat a controlling stake in the 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 recession.

Obama toured the Chrysler plant, which makes Jeep Wrangler sport utility vehicles, where he also met Marchionne.

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 pay back came six years earlier than had been expected.

The final deal sealed Thursday 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.

Marchionne told reporters after the Obama event that Fiat had the cash to buy the UAW shares, but that an initial public stock offering (IPO) could be the best way for the union to get its money, the Detroit News reported.

He said however no discussions are in the work about buying out the union or doing an IPO. Marchionne prefers an IPO, but would like to wait until at least next year to do so, the newspaper said.

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 US government support had given the company 'a rare second chance to emonstrate 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.

Read more about Italy