Italian automaker Fiat SpA has reached an agreement to acquire the remaining shares of Chrysler for $3.65 billion US in payments to a union-controlled trust fund.
At least one auto analyst says Fiat's ownership of Chrysler means job security in Canada, where nearly 8,000 hourly employees work for Chrysler.
'It should provide an avenue to actually expand.' - Dennis DesRosiers, auto analyst
"With sole ownership, and the ability to get synergies from the two companies together, Chrysler should be able to operate a little bit more efficiently. And a more efficient company is a more secure company," said Dennis DesRosiers of DesRosiers Auto Consultants.
DesRosiers suspects the purchase will lead to job creation
"It should provide an avenue to actually expand. Now, where in the world that will happen, it's hard to say," DesRosiers said. "But the two companies together are a heck of a lot stronger than the two companies apart."
Approximately 3,300 hourly employees work at Chrysler's Bramalea plant. Another 4,500 hourly employees work at Windsor Assembly Plant.
“We’re going to have discussions with Marchionne, with Chrysler executives, about what this really means with regards to maintaining a footprint [in Canada],” said Unifor Local 444 president Dino Chiodo, who represents workers in Windsor. “It becomes a global player in the whole economy. He has presence in every part of the globe.”
Fiat already owns 58.5 per cent of Chrysler's shares, with the remaining 41.5 per cent held by a United Auto Workers union trust fund that pays health care bills for retirees.
Stock investors loved the deal, sending Fiat shares up 15 per cent in European trading Thursday.
Under the deal announced Wednesday, Fiat will make an initial payment of $1.9 billion (all funds US) to the fund, plus an additional $1.75 billion upon closing the deal.
Chrysler will also make additional payments totalling $700 million to the fund as part of an agreement with the UAW. The deal is expected to close on or before Jan. 20, according to a statement from Chrysler.
Marchionne wants 'global automaker'
Sergio Marchionne, CEO of both Fiat and Chrysler, has long sought to acquire the union's shares in order to combine the two companies.
"The unified ownership structure will now allow us to fully execute our vision of creating a global automaker that is truly unique in terms of mix of experience, perspective and know-how, a solid and open organization," Marchionne said in a statement issued by Turin, Italy-based Fiat.
The deal eliminates the need for an initial public offering of the union fund's stake, which analysts had previously valued at $5.6 billion.
Fiat went to court last year seeking a judgment on the price, but the trial date was set for next September.
Marchionne can't spend Chrysler's cash on Fiat's operations unless the companies merge. In recent months he made it clear that he preferred to settle the dispute without an IPO, but filed the paperwork for the offering in September at the trust's request.
Chrysler's profits have helped prop up Fiat on the balance sheet as the Italian automaker struggles in a down European market.
The Auburn Hills, Michigan, automaker earned $464 million in the third quarter on U.S. sales of the Ram pickup and Jeep Grand Cherokee, its ninth-straight profitable quarter. The results boosted Fiat, which earned $260 million in the quarter. Without Chrysler's contribution, Fiat would have lost $340 million.