Fiat has reached a deal with the UAW's retiree trust to buy the remaining shares of Chrysler. The agreement ends a high-stakes game of chicken, that would have forced Chrysler to issue an IPO that Fiat was trying to avoid. Fiat will pay the trust $4.35 billion.
In an email to employees, Fiat Chairman John Elkann and CEO Sergio Marchionne hailed the agreement, calling it "a historic day" for both companies.
Fiat now owns 58.5 percent of Chrysler and the UAW's Voluntary Employee Beneficiary Association or VEBA owns 41.5 percent. Marchionne has been trying to buy the trust fund's portion for years but they have not been able to agree on a price until now. The VEBA had threatened to force the IPO, to drive up the value of its shares.
The VEBA provides health care benefits for 117,000 retired Chrysler workers and their families. VEBAs were formed for all three Detroit automakers back in 2007, as a way to try and contain health care costs. During the bailouts, the VEBAs were given shares of both General Motors and Chrysler, in exchange for concessions.
The deal will give Fiat total control of Chrysler. Fiat-Chrysler repaid nearly $8 billion dollars in loans to the U.S. and Canadian governments. The Treasury department still lost more than $1billion on the Chrysler bailout.