DETROIT—Fiat SpA early Tuesday boosted its stake in Chrysler Group LLC to 30% from 25% after the Italian auto maker met the second of three U.S. government-mandated requirements that automatically trigger increases in its ownership stake.
The 5% rise, which Chrysler confirmed, took effect after Fiat achieved two goals related to Chrysler's international sales. One, which required Fiat to help Chrysler increase its revenue from markets outside of North America by $1.5 billion, was achieved recently. Fiat also had to secure agreements to sell one or more Chrysler vehicles through 90% of its dealers in Brazil and the European Union, and did so in the past few days.
Under an agreement worked out between Fiat Chief Executive Officer Sergio Marchionne and the auto maker's current owners, the Chrysler vehicles sold overseas can be rebadged under Fiat brand names. For example, the Dodge Journey, a seven-passenger vehicle, will be marketed as the Fiat Freemont when it goes on sale in the second half of this year.
Mr. Marchionne had voiced frustration over difficulties fulfilling the distribution requirement due to Brazil's strict dealer laws and had been searching for a compromise since February.
This is the second time this year that Fiat has increased its ownership. It was originally given a 20% stake in Chrysler as part of the company's 2009 bankruptcy reorganization and alliance with Fiat. In January, the stake increased to 25% after Fiat achieved one performance goal by helping Chrysler begin to build a new, fuel-efficient engine based on Fiat technology in Dundee, Mich.
Fiat can lift its stake by another 5% once Chrysler starts producing a small car in the U.S. based on Fiat technology that can go 40 miles on a gallon of gasoline. Mr. Marchionne intends to fulfill that requirement this year.
He is also pulling together a plan to secure commercial financing from a group of banks in the second quarter to pay off the current U.S. and Canadian loans used to keep Chrysler afloat during its bankruptcy. Once the loans are paid off, Fiat can then purchase another 16% stake in Chrysler and take its ownership to 51%, which Mr. Marchionne aims to do by the end of the year.
The increase in Fiat's ownership slightly reduced the stake of Chrysler's other owners. The United Auto Workers health trust, known as the Voluntary Employees' Beneficiary Association, remains the largest shareholder, with 59.2%, followed by the U.S. Treasury, with 8.6%, and the Canadian government, with 2.2%.
The union trust and governments intend to sell their stakes once Chrysler goes public in 2012.
