Fiat SpA is on track to increase its stake in Chrysler Group LLC to 30 percent from 25 percent, possibly by the end of this month, a person familiar with the matter said.
Fiat's stake will increase once the Italian auto maker completes two international sales goals established by the U.S. government as part of the 2009 federal bailout of Auburn Hills, Mich.-based Chrysler, reported The Wall Street Journal.
One part of the requirement is that Fiat must help Chrysler lift its sales revenue from markets outside North America by more than $1.5 billion since its emerged from bankruptcy in June 2009, and that has already been accomplished, this person said.
Fiat also must begin selling Chrysler vehicles at most of its dealerships in Latin America. Sergio Marchionne, who serves as chief executive of both Chrysler and Fiat, is putting the final touches on a plan that clears the way to do so by month end, this person said.
Meeting the dealership target has been difficult to accomplish due to franchise laws, especially in Brazil. Mr. Marchionne has voiced frustration in recent weeks over the challenges of completing the task.
Chrysler needs only to show proof to the U.S. Treasury Department it has met both requirements to trigger an increase in Fiat's holding. Chrysler's current shareholders—the United Auto Workers health care trust, the U.S. Treasury Department and the Canadian government—each will relinquish a small percentage of their holdings to give Fiat the additional 5 percent stake in Chrysler.
Chrysler and Fiat declined to comment.
News that Fiat was close to increasing its Chrysler stake was earlier reported by Bloomberg News.
Fiat can boost its holding again another 5 percent to 35 percent when Chrysler introduces a small car that gets at least 40 miles to a gallon of gasoline.
Mr. Marchionne eventually aims to make Fiat the majority shareholder in Chrysler, possibly by the end of the year. Fiat cannot lift its stake to 51 percent, however, until after Chrysler pays back the $7.4 billion its owes the U.S. and Canadian governments.
Mr. Marchionne has said he is working with a group of banks to secure commercial financing which will allow him to pay off the loans and secure a lower interest rate. The CEO has plans to take Chrysler public although he recently conceded that may now not happen until next year.
Fiat was originally given a 20 percent stake for taking management control of Chrysler after its exit from its federally financed bankruptcy reorganization. Fiat's stake was increased to 25 percent in January after meeting its first performance requirement, helping Chrysler start production of a fuel-efficient engine in a U.S. plant.
