Corporate Business | February 05 2015

The Truth Behind the Chrysler Bailout

Time has come to once and for all put to bed the urban legend that “Fiat SpA’s Sergio Marchionne gained control of Chrysler without spending a single dollar.”

Let’s set the record straight and not purposely forget such essential facts as: a) in June 2009, Chrysler’s value was zero, to say the least; b) at that time, nobody was lining up in front of Chrysler’s Auburn Hills, Michigan, headquarters interested in buying a single stake in the automaker; c) since 2009, Fiat has made massive investments into Chrysler, including contributing its intellectual property and welcoming tens of thousands of dedicated new hires into the fold. And can we, at long last, refrain from referencing the all-too-frequent, self-centered and hilarious interpretations of Chrysler by – among others – a failed contestant of the lengthy and highly-publicized three-way succession race for the coveted high throne at GE.

Fiat S.p.A. paid more than $5.6 billion to acquire the full ownership of Chrysler Group LLC, recently renamed FCA US LLC.

In detail, Fiat paid: $1.268 billion for an incremental equity call option, to acquire 16% of Chrysler; $500 million for the 6% formerly owned by the U.S. Treasury; $125 million to acquire the 1.5% formerly owned by the Canadian governments; $75 million to purchase the rights under an equity recapture agreement; and $3.65 billion to purchase the final 41.5% of equity interests in Chrysler Group that had been held by the UAW Retiree Medical Benefits Trust, also known as the VEBA.

Additionally, please note that Ron Bloom, formerly a special assistant to President Obama, in an interview with Detroit radio personality Paul W. Smith, stated: “When Chrysler, the new company, says: We paid back every penny we borrowed − that is 100 percent correct.”

This is the truth, plain and simple. All the rest is fiction, urban myth with the added and unsavory flavor of intellectual dishonesty.