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Chrysler to be free of government ownership before General Motors

Fiat says it will buy the U.S. Treasury’s 6% stake in Chrysler.   

The announcement means Chrysler will be free of government influence long before General Motors will be. 

Fiat and the U.S. Treasury will negotiate the price over the next ten business days.   Fiat will own 52% of Chrysler once the deal goes through.     

Sheldon Stone is a restructuring expert with Amherst Partners.  He says the negotiations should go smoothly, since the federal government is highly motivated to get out of the car business.

"It makes them look good and that they did the right thing and helped save this company," says Stone.  "And we can’t forget that we’re going into an election year."

Last week, Chrysler repaid the last of its outstanding federal loans.  All told, the Detroit automaker has repaid $10.6 billion of the $12.5 billion the U.S. Treasury invested in Chrysler.

Meanwhile, the U.S. Treasury still holds about 26% of General Motors, after selling about 34% of the government's GM stock in an initial public offering, or IPO, last November.  The Treasury made more than $20-billion on the sale.

GM is currently chafing under TARP rules that impose a cap on executive compensation so long as the Treasury is part owner of the company.   

Chrysler will no longer be subject to those rules once the U.S. Treasury sells its Chrysler holdings. 

Amherst Partners' Sheldon Stone says the move by Fiat to buy the U.S. Treasury's stake in Chrysler is part of the preparations for Chrysler's IPO.  He says not having the government involved will simplify things.

"Fiat will have a total say over the process of getting the IPO ready and what the IPO looks like," says Stone.  "Now you're taking another agenda, which is the U.S. government's agenda, off the table, and it (becomes) an agenda of one company doing the right thing for their shareholders."

Stone notes that there were many people, himself among them, who doubted that the government's assistance to Chrysler would actually save the company.  Stone credits strong management by CEO Sergio Marchionne for the company's steady ascendency.


Tracy Samilton covers energy and transportation, including the auto industry and the business response to climate change for Michigan Public. She began her career at Michigan Public as an intern, where she was promptly “bitten by the radio bug,” and never recovered.
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