Delay makes Chrysler stake buy costlier: Fiat CEO

The longer Italian carmaker Fiat SpA waits to add to its stake in Chrysler Group LLC, the more expensive the purchase will be, the chief executive of both companies said on Wednesday.

Fiat can buy the US Treasury's stake in Chrysler over the next 12 months. Starting in July of next year, Fiat can also buy shares held by the healthcare trust tied to the United Auto Workers union, known as the VEBA. "The more we wait, the costlier it becomes," CEO Sergio Marchionne said when asked about the possibility Fiat may buy the 6.6% stake in Chrysler held by the US Treasury. He declined to comment further. The purchase price is based in part on Chrysler's earnings before interest, taxes, depreciation and amortization for the previous four quarters. As Chrysler's quarterly earnings improve, so does the price of buying the stake held by the US Treasury and the VEBA. Earlier this month, Chrysler reported its first quarterly net profit since emerging from bankruptcy in 2009, helped by a stable of refreshed new models. Fiat exercised an option on Tuesday to boost its stake in Chrysler to 46% following the US automaker's repayment of USD 7.6 billion in US and Canadian government loans from its 2009 bailout. In addition to the 6.6% of Chrysler owned by the US Treasury, the VEBA holds 45.7%. The rest is held by the Canadian government. Ron Bloom, the Obama administration's point man for auto restructuring, has said the government wants to dispose of the common equity stake it still holds in Chrysler "as soon as practical." Speaking to reporters as he arrived in Turin for the presentation of Fiat's new Lancia Ypsilon model, Marchionne said Fiat would consolidate Chrysler in its financial results from June 1 - ahead of some analysts' expectations. Asked about a possible listing of Chrysler, he said the timing of an initial public offering depended on the VEBA's plans to cash in its 45.7% stake in the US automaker. "Whether or not to list Chrysler has only a relative value for Fiat," he said. "(An IPO) depends on market conditions and (VEBA's) targets, not on us." Marchionne repeated Fiat would meet a target to bring its stake in Chrysler to 51% in the fourth quarter. To help achieve this figure, the US carmaker is expected to develop a vehicle that gets 40 miles per gallon on a Fiat platform in the last quarter of 2011. Fiat shares ended 3.3% higher at 7.125 euros, outperforming a 0.8% rise in Europe's DJ Stoxx Auto index.