Fiat To Buy Remaining US Stake In Chrysler

DETROIT (WWJ/AP) - Italian automaker Fiat says it intends to buy the U.S. government's remaining 6 percent stake in Chrysler. Chrysler would be free of U.S. government ownership if the sale goes through.

Fiat said Friday it notified the Treasury Department that it will take an option to buy the shares. The price would be negotiated within 10 business days. If no agreement can be reached, Fiat would pay a price determined by investment banks appointed by both parties.

Why now? WWJ spoke with Auto Analyst John McElroy.

"The reason that Fiat is moving now to by Chrysler stock from the government is it knows that once Chrysler goes public, that stock's going to go up in price. So, Fiat's trying to save some money here and buy as much controlling interest in the company before that price goes up," he said.

After buying the shares, Fiat would hold 52 percent of Chrysler.

"A lot of people are uncomfortable with the fact that Chrysler will now be foreign-owned. But, remember, it was foreign-owned, for all practical purposes, in the so-called merger of equals," McElroy said.

"But I'd hasten to remind everyone that if Fiat hadn't stepped up and taken control of Chrysler like it did, there would be no Chrysler today.  It would have not even gone into bankruptcy. It would have just simply disappeared," he said.

Chrysler announced on Tuesday that it has repaid $7.5 billion in bailout loans the company got from the U.S. and Canadian governments. Fiat earlier this week paid $1.3 billion for a 16 percent stake in Chrysler.

The Associated Press contributed to this report.