Fiat ups Chrysler stake after meeting int’l goals

* Chrysler meets international targets, Fiat stake jumps

* Chrysler amends 2009 Treasury pact to meet milestone

* Chrysler cars to be sold through Fiat dealers in Europe

* Fiat to compensate Chrysler for technology use

By Deepa Seetharaman

DETROIT, April 12 (Reuters) – Italian automaker Fiat SpA
(FIA.MI: Quote, Profile, Research) boosted its stake in Chrysler Group LLC on Tuesday
after the U.S. automaker met two international goals outlined by
the U.S. government during Chrysler’s 2009 bailout.

Fiat’s stake in Chrysler jumped to 30 percent, up from 25
percent, Chrysler said, after Chrysler handily surpassed an
international sales target and reached a pact to expand its
presence outside North America through Fiat’s dealer network.

The goals were part of a complex deal the U.S. government
reached with Fiat in 2009 that gave the Italian company a stake
and management control of Chrysler.

Under that deal, Fiat’s stake could increase if Chrysler met
three tests. The second test was designed to cut Chrysler’s
reliance on the North American market and came in two parts.

The first part called for Chrysler to report $1.5 billion in
revenue outside the United States, Canada and Mexico, where it
derived 87 percent of its sales last year.

In 2010, Chrysler reported $5.4 billion in revenue outside
North America, according to a Feb. 25 filing with the U.S.
Securities and Exchange Commission.

Chrysler also had to sell its vehicles through 90 percent of
Fiat’s dealers in Latin America, but local franchise laws proved
to be an obstacle to this goal.

To resolve this issue, Chrysler altered the deal with
Treasury to allow its vehicles to be sold under the Fiat brand
in Brazil, a change that Chrysler’s head of international
operations, Mike Manley, flagged last week. [ID:nN07173127]

Chrysler’s board of directors recommended these changes to
the deal, Chrysler spokeswoman Eileen Wunderlich said. They were
approved by Fiat, the Treasury, the Canadian government and
Chrysler’s largest shareholder, the health care trust affiliated
with the United Auto Workers union.

Chrysler also announced other key changes to the 2009
Treasury deal on Tuesday.

Now, Chrysler must sell its vehicles, which can be rebadged
as Fiats, through at least 90 percent of Fiat dealers in the
European Union. Chrysler vehicles also must be counted toward
Fiat’s EU emissions ratings.

Additionally, Fiat must provide “compensation” for the use
of Chrysler technology outside of North America.

With Fiat taking 30 percent of Chrysler, the UAW stake is
59.2 percent. The U.S. Treasury now has an 8.6 percent holding
in Chrysler, while the Canadian government has 2.2 percent.

Chrysler has been led by Sergio Marchionne, who is also
chief executive of Fiat, since the U.S. automaker emerged from a
government-funded bankruptcy in June 2009.

When it took control of Chrysler, Fiat declined to put any
cash into the U.S. automaker. But Treasury agreed Fiat could
boost its stake in stages if the American car company met three
tests designed to put it on firmer financial footing.

Chrysler met the first test in January when it produced a
fuel-efficient engine at a formerly-idled plant in Dundee,
Michigan. The final test is expected to be met in the fourth
quarter, when Chrysler produces a 40-mile-per-gallon car built
on the Fiat platform.

After that Marchionne has the chance to buy an additional 16
percent of Chrysler. He has said one of his main goals this year
is to take Fiat’s ownership of Chrysler to 51 percent.

Majority ownership would likely come before an initial
public offering of Chrysler, which could come as early as the
second half of this year. [ID:nLDE73A0CS]

(Editing by David Cowell)

Fiat ups Chrysler stake after meeting int’l goals