Fiat is now poised to take over complete control of Chrysler Group LLC after finally reaching a deal to purchase the remaining 41.5% from the United Auto Workers trust putting an end to a bitter battle between the two entities.
The trust, part of the Voluntary Employment Beneficiary Association or VEBA created nearly 7 yesrs ago manages healthcare for Chrysler’s 117,000 retirees over the value of Chrysler stock. Under the agreement, Chrysler will use $2.6 billion of its own funds, while Fuiat will finance $1.75 billlion for the buyout. If all goes well, the deal is expected to close on June 20th.
Fiat CEO Sergio Marchione has been seeking to merge the two automakers since 2009, after his company helped bail-out Chrysler, which had filed for Chapter 11 bankruptcy. However, VEBA had continually rejected all offers as being “too low,” until now, when it found it necessary to covert its share to cash to pay for the crippling cost of healthcare for Chrysler’s 117,000 retired union employees.
The original trust was founded by the UAW (along with all 7 Detroit auto manufacturer) back in 2007 as a means of alleviating the burden of paying for retiree medical care, years before healthcare costs began to rapidly outstrip the general rate of inflation.
News of the deal sent Fiat stock soaring by 15% yesterday, and has given the company hope that it will now be able to increase its own brand name sales here in the US.