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Chrysler profit jumps; Fiat hit by merger worry

Published on NewsOK Modified: August 6, 2014 at 3:12 pm •  Published: August 6, 2014
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DETROIT (AP) — Chrysler remained on the comeback trail with a 22 percent second-quarter profit increase, but U.S. investors may not get a chance to buy shares of the company if a planned merger with Fiat gets scuttled.

Shareholders of Fiat, the majority owner of Chrysler, overwhelmingly voted last week to merge the two companies. But on Wednesday, Fiat shares fell 5.5 percent in Italy due to concerns that the merger could be derailed by investor flight.

The merger would move the new company's tax headquarters to London and list its shares on the New York Stock Exchange. It could be completed by mid-October.

But one important hurdle remains. Italian law gives dissenting shareholders the right to cash out. If they require the company to buy back stock worth more than 500 million euros, the merger is off.

The Italian market drop reflects concerns that the payout, which has been set at 7.727 euros a share, or 16 percent above Wednesday's close, will exceed Fiat's ceiling.

Sergio Marchionne, CEO of both companies, said Wednesday that fear of the merger being scuttled is overblown. If it doesn't happen, joint operations would continue, and Fiat would return with another proposal when conditions are more favorable, he said.

"I am absolutely unfazed by all of this," said Marchionne.

Marchionne's comments came after Chrysler reported a relatively strong performance for the quarter, with profits fueled by rising U.S. sales. The company made $619 million, compared with $507 million a year ago. Revenue rose 14 percent to $20.5 billion.

But Marchionne also said he was not satisfied with the results, indicating that the next phase of Chrysler's revival would be to improve its profit margin — the percent of revenue that it gets to keep.

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