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Chrysler may buy out Ottawa's equity stake: CEO

Chrysler and the governments of Canada and Ontario are open to the idea of the automaker buying out the governments' stakes in the company.
Chrysler CEO Sergio Marchionne thanked governments for giving the firm 'a second chance' by bailing them out during the recession. (Jonathan Moscrop/Associated Press )

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  • Chrysler willing to buy out government's stake

Chrysler and the governments of Canada and Ontario are open to the idea of the automaker buying out the governments' stakes in the company.

During the recent recession, the governments of Canada, the United States and Ontario provided the automaker with more than $7.5 billion worth of loans, plus billions more for equity stakes while the company restructured.

At an event in Toronto to formally recognize Chrysler repaying the debt portion of its bailout, CEO Sergio Marchionne said he is willing to buy out the government holdings in the company in advance of an IPO expected some time in 2012.

"I've made it clear that we will be quite willing to purchase Canada's interest in this," Marchionne said. "But it's totally dependent on the discretion of the governments in Canada."

That's because he says the company has a legal call right on the U.S. position, but does not have that for Canada's position. (A call right gives a company the right — but not the obligation — to buy a certain investment, at a certain price, at a certain time.)

"There's a lot of certainty associated with getting cash proceeds this week, as opposed to waiting 24 months and living with the uncertainty of the capital markets being there, the markets being what they are, and us continuing to execute as we planned," Marchionne said. "You've got to make a decision."

The company said Friday that it would buy the U.S. government's six per cent stake in Chrysler.

"From a government standpoint, the government really has no business being in the car business. This is something that should be left to the capital markets," Marchionne said.

For his part, Flaherty said Ottawa might look at a similar arrangement. Combined, Ontario and the federal government own roughly 1.7 per cent of Chrysler.

"We've never believed the government of Canada should be in the automotive business," he said. "But we have to look out for good value for Canadian taxpayers."

It's unclear how much exactly Chrysler shares would have to sell for in order for Canada to get 100 per cent of its equity investment back.

"We will look at whatever is proposed and consider that, bearing those two principles in mind," Flaherty said.

With files from The Canadian Press and Danielle Bochove