Fiat shares surge on Chrysler merger
Fiat stock jumped 15.8 percent at the opening to €6.88 before slipping back slightly to €6.70 later in the day.
The complex deal announced by Fiat on Wednesday (1 January) paves the way for a full merger that will create a new global manufacturing company.
Fiat said the long-awaited agreement with its US partner included a US$1.75bn cash payment for the 41% stake that has been held by the VEBA fund of the US worker's union UAW since Chrysler's bankruptcy procedure.
Fiat chief executive Sergio Marchionne, who is also the chief executive of Chrysler, said in a statement from the company's headquarters in Turin in northern Italy that the transaction would "go down in the history books".
"The unified ownership structure will now allow us to execute our vision of creating a global manufacturer that is truly unique," Marchionne was quoted as saying.
Deal wrapped up by 20 January
Fiat said it expected the deal to be wrapped up by 20 January, completing a process that began in 2009 with the start of Fiat's partnership with Chrysler following the storm of the global economic crisis and the plunge in US car sales.
"The costs and financing of this deal are more favourable to Fiat than the market expected, and the deal successfully secures Fiat's operational and financial future," Max Warburton, a senior analyst at Bernstein Research, told Dow Jones Newswires.
Fiat originally took a 20% stake in the third-largest US car manufacturer as part of the Chrysler's bankruptcy proceedings.
What was originally seen as a risky deal for Fiat - the German company Daimler had failed to turn around Chrysler - has paid off handsomely as Chrysler's sales are now booming after decades of turbulence and decline.
Chrysler's profits have been keeping Fiat buoyant in recent years amid a deep downturn in Europe. Marchionne has been steadily expanding Fiat's stake in Chrysler.
Italian trade unions have hailed the agreement, saying they hoped it meant Fiat would now start investing more in Italy - a key bone of contention that has made Marchionne a hated figure for many unionists who suspect he is planning to move Fiat's operations out of Italy.
"It is now crucial that investments begin as soon as possible in the Italian factories as has been announced," said Ferdinando Uliano of the Fim-Cisl union.
Fiat employs 197,000 people, including 80,000 in Italy - making it the biggest private sector employer.
Fiat was founded in 1899 and it flourished during Italy's post-war economic boom, becoming associated with its late chairman Gianni Agnelli -- a fashionable playboy and shrewd businessman who engineered its international expansion.
It has reflected the downs as well as the ups of Italian industry and it became an important hub of trade union militancy and violent protests in the 1970s and 1980s.
Marchionne was widely credited for the company's turnaround after taking over as its chief executive in 2004 but domestic sales have been hard hit by the economic crisis and he has had repeated run-ins with unions over working conditions.
Source: AFP via I-Net Bridge
Source: I-Net Bridge
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