TORONTO — Finance Minister Jim Flaherty and the CEO of Chrysler indicated Monday they may be moving toward a deal to sell Canadian and Ontario government shares in the recovering company to Italian carmaker Fiat.
The Canadian governments received about 1.7 per cent of Chrysler two years ago as part of a bailout that also provided $1.7 billion in loans to help the Detroit company survive the North American auto sector’s worst downturn ever.
The U.S. and Canadian governments also bailed out industry giant General Motors with an even bigger financial aid package and that company and its Canadian unit have turned around their fortunes and are now generating solid profits and hiring back previously laid off workers at some plants.
At Chrysler, which is already controlled by Fiat, the automaker recently paid back the last of the money it borrowed from the Canadian and American governments, plus interest.
Fiat then began the process of buying the shares owned by the U.S. government, expanding its stake in the U.S. carmaker.
Flaherty joined Sergio Marchionne, the chief executive of both Fiat and Chrysler, at a Chrysler Canada casting plant in Toronto on Monday morning to trumpet the loan repayment. When asked about the government Chrysler stock, neither man gave a firm answer, but suggested a deal could be in the cards.
“We will be quite willing to consider purchasing Canada’s interest in this, but it is a decision that obviously it’s totally dependent on the discretion of the government of Canada and the province of Ontario,” Marchionne said, adding that he and Flaherty briefly discussed it before stepping in front of the cameras Monday.
Unlike with the shares owed by the U.S. government, the company has no right to compel the Canadian government to sell.
Flaherty said Ottawa will wait to see how the stock transfer process unfolds in the United States before deciding whether Canada will also sell its shares.
The federal government has never believed it should be in the automobile business but, on the other hand, it has to ensure that Canadian taxpayers get good value for investing in Chrysler at a time when its survival was in doubt, Flaherty said.
“We will look at whatever is proposed, that comes out of the process that is underway now with the United States Treasury and consider that, bearing those two principles in mind,” Flaherty said.
“We’re certainly open to it but we have to look at what the proposal is before making a decision, of course.”
Marchionne wouldn’t speculate on exactly what the 1.7-per-cent stake might be worth, but auto industry expert Tony Faria puts it at about $110 million, based on the $1.27 billion Fiat paid for an additional 20-per-cent stake in Chrysler in 2009.
Whatever is negotiated with the U.S. government will affect what Fiat comes to Ottawa and Ontario with, said Faria, a professor at the auto research centre at the University of Windsor.
“From there it would be up to the Canadian government to either pretty much go with that price, or the Canadian government can hang onto their ownership in Chrysler and wait for the IPO, if they think they can get a better price at that time,” he said.
But the difference isn’t likely to be “enormous,” Faria said.
The Italian automaker said Friday it will buy the U.S. government’s six-per-cent stake in Chrysler under a process that was put in place in 2009 when Chrysler virtually shut down while in bankruptcy court.
Fiat initially received a 20 per cent stake in Chrysler in 2009 for providing Chrysler with management expertise and technology.
Since then Fiat has been increasing its holdings in Chrysler and will soon control more than half of the company.
Fiat has helped change the corporate strategy of Chrysler, brought new fuel-efficient vehicles quickly to market and made the company cut costs and operate more efficiently.
The future looks brighter for the company, which has cut thousands of jobs in the United States and Canada in its bid to survive bankruptcy.
In Canada, the company employs 9,000 people and has major assembly plants in Windsor, a southwestern Ontario border city, and Brampton, a community northwest of Toronto.