Chrysler Group LLC will soon sever its ties with the U.S. government after most – but not all – of the bailout loans it got two years ago are repaid.
Italian automaker Fiat SpA agreed late Thursday, June 2, to buy the U.S. Treasury's 6 percent interest in Chrysler for $500 million. Once the deal closes, the government will no longer hold a stake in the auto company. Treasury officials said it could take up to three months to make sure the agreement meets regulatory approvals, but it will likely close more quickly than that.
The deal will give Fiat a majority 52 percent stake in the automaker, just two years after it agreed to manage Chrysler after its bankruptcy.
President Barack Obama is expected to announce the agreement Friday during a trip to a Chrysler facility in Toledo, Ohio.
The U.S. government will ultimately lose around $1.3 billion in the deal. The government authorized $12.5 billion in loans for Chrysler from the end of 2008 through Chrysler's bankruptcy filing in the summer of 2009. The Treasury Department said Thursday that Chrysler has repaid $11.2 billion — including $2 billion in undrawn loans — but it is unlikely to recover the rest. Government officials have long said that they didn't expect to recover the full amount they loaned to Chrysler and General Motors Co. during the auto industry downturn, and that their top priority was saving thousands of auto jobs.
Fiat also agreed to pay $75 million for the right to purchase the Chrysler shares held by a trust for retired autoworkers. The Treasury Department will receive 80 percent of those proceeds, or $60 million, while the government of Canada will get $15 million. The trust holds a 47.5 percent stake in the company. It is expected to sell its shares when Chrysler eventually holds an initial public offering, which could happen later this year or early next year, The Associated Press reported.
