AUBURN HILLS, Mich., Jan. 2 (UPI) -- Fiat SpA's $4.35 billion deal to buy the rest of Chrysler Group LLC will let the combined U.S.-Italian company become a "global automaker," Fiat's chief said.
The agreement with the United Auto Workers' healthcare trust for retired Chrysler union workers for its 41.5 percent of the once-bankrupt U.S. automaker ends the need for an initial public offering of Chrysler shares, the Detroit Free Press and Wall Street Journal said.
Fiat, which acquired control of Chrysler as part of a 2009 bailout deal brokered by the Obama administration, owns 58.5 percent of Chrysler.
The healthcare trust, known as a voluntary employee beneficiary association under federal tax law, was created by the UAW and each Detroit automaker in 2007 to help alleviate the crippling costs of retiree healthcare under contracts negotiated years earlier, before healthcare costs soared much higher than the general inflation rate, the Free Press said.
Once the deal is completed Jan. 20, Chrysler will no longer be an independent business.
"In the life of every major organization and its people, there are defining moments that go down in the history books. For Fiat and Chrysler, the agreement just reached with the VEBA is clearly one of those moments," Chief Executive Officer Sergio Marchionne said in a statement Wednesday.
"The unified ownership structure will now allow us to fully execute our vision of creating a global automaker," he said.
U.S.-born Fiat Chairman John Elkann said he had "been looking forward to this day from the very moment that we were chosen to assist in the rebuilding of a vibrant Chrysler back in 2009."
Robert Naftaly, chairman of the committee governing the trust, said in a statement, "This agreement is in the best interests of the trust's UAW Chrysler retiree members and their families who rely on the trust to provide vital healthcare benefits."
The trust provides healthcare benefits to more than 117,000 UAW-represented Chrysler retirees, spouses and dependents.
It will increasingly need to covert its Chrysler shares into cash to make the medical payments, Center for Automotive Research analyst Kristin Dziczek told the Free Press.
"It wasn't in either party's interest to go through with an IPO," she said. "Since the UAW trust can't buy healthcare coverage with Chrysler shares, it was in their best interest to get as much cash as possible."
At the same time, Marchionne needs to consolidate the companies' engineering and manufacturing operations and needs Chrysler's cash to finance Fiat's costly European restructuring plan in Europe, where Fiat has suffered from a long slump in sales, the Journal said.
That plan calls for the export of more Alfa Romeo sports cars and Maserati luxury models from Italy and production of a Jeep subcompact in Italy, the Free Press said.
Marchionne hopes to create the world's No. 7 automaker, with combined sales of 6 million vehicles, the Journal said.
Under the deal's terms, Fiat will pay the trust $3.65 billion for its Chrysler stake, which it got as part of Chrysler's government-led bankruptcy in 2009. Fiat will use $1.75 billion of its own money and $1.9 billion of Chrysler's cash to make the payment.
Chrysler will also pay $700 million to the trust in four installments.
Once the agreement is complete, Fiat will have spent $3.7 billion of its own money and a total of $6.3 billion to buy Chrysler.