The balance sheets of carmakers Fiat and Chrysler will be consolidated next week as part of the deepening integration of the two automakers, the two companies' CEO Sergio Marchionne said Wednesday
The announcement comes the day after Fiat hit the button on a crucial $7.6 billion money transfer to the U.S. and Canadian governments, and paid $1.2 billion for an additional 16 percent stake in Chrysler. That tightened its control of the once-bankrupt U.S. automaker that it took over two years ago in exchange for technology.
Fiat now owns 46 percent of Chrysler and is set to reach 51 percent by the end of the year.
"From the first of June, Chrysler accounts will be consolidated in Fiat's balance sheets," Marchionne said, indicating another milestone in the integration process.
Marchionne arrived in Turin for a new European car launch on an overnight flight from Detroit after celebrating the repayment of the government loans with workers. He wore a red-white-and-blue button emblazoned with "Paid" and Tuesday's date, May 24, 2011 _ but the CEO was already contemplating the next moves.
He said the timing of bringing Chrysler public will be determined by the U.S. markets, which he indicated were more healthy and efficient than in Italy. He noted Chrysler was able to raise $6 billion from investors in the span of one week.
"The market demand for the financing was over $11 billion. It tells you the depth of the markets in North America. It makes it a lot easier to manage industrial operations when you've got that kind of backing from the capital markets," Marchionne said.
He has previously said the IPO could come at the end of this year, beginning of next, but refused to be pinned down.
Fiat also can exercise options to buy the remaining stake held by the U.S. and Canadian governments, as well as part of the stake held by the autoworkers' union pension fund trust
With another 5-percent share that Fiat will get by the end of the year for approval of a 40 mpg car, Fiat could potentially raise its control to 70 percent, a move that would protect it from other investors snapping up a sizable share of Chrysler.
Marchionne wouldn't say what he plans, but noted that those stakes would get more expensive once Chrysler goes public.
Marchionne said the issue remains of how to organize the U.S. and Italian automakers. While he sidestepped the questions of whether they will merge outright, or where any future entity would be based, he did say that there needs to be some resolution of corporate structure.
"I think the ability to maintain two separate corporate organs for the purposes of managing a mass market producer is nonsense. We need to find a solution going forward," Marchionne said.
He said the companies were well-integrated, pointing to the sharing of technology and platforms, but that the existence of two corporations "creates an additional burden."
"There is a point and time when the level of activity starts getting to you," he said.
Good access to investment through the markets is one consideration, Marchionne said.
"It is one of the considerations you have to nail down before you make a decision on corporate governance," he said.
Fiat took over Chrysler with a 20 percent stake two years ago in exchange for small car and cleaner engine technology, as well as management know-how. It had been raised to 30 percent by meeting to U.S. Treasury-set performance benchmarks this year.
The repayment of the government loans was another sign of Chrysler's Fiat-engineered comeback.
"I think what we have done is we have turned Chrysler back to its American roots. It is a great carmaker, but it is a great American car maker," Marchionne said, citing brands like Jeep and Dodge that are quintessentially American.