Chrysler 2010 Annual Report Download - page 242

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29. Guarantees granted, commitments and contingent liabilities
Guarantees granted
With respect to Continuing Operations at 31 December 2010 the Group had provided guarantees on the debt or commitments of third parties or jointly
controlled and associated entities totalling €51 million; the corresponding amount at 31 December 2010 relating to Discontinued Operations was
€655 million. At 31 December 2009, the Fiat Group had provided guarantees for an amount of €593 million.
Other commitments and important contractual rights
The Group has important commitments and rights deriving from outstanding agreements, summarised in the following.
Teksid
Fiat S.p.A. is subject to a put contract with Renault in reference to the original investment of 33.5% in Teksid, now 15.2%. In particular, Renault would acquire
the right to exercise a sale option to Fiat on its interest in Teksid, in the following cases:
in the event of non-fulfilment in the application of the protocol of the agreement and admission to receivership or any other redressement procedure;
in the event Renault’s investment in Teksid falls below 15% or Teksid decides to invest in a structural manner outside the foundry sector;
should Fiat be the object of the acquisition of control by another car manufacturer.
The exercise price of the option is established as follows:
for the original 6.5% of the share capital of Teksid, the initial investment price as increased by a given interest rate;
for the remaining amount of share capital of Teksid, the share of the accounting net equity at the exercise date.
Chrysler
With specific reference to the Fiat call options under the Chrysler-Fiat strategic alliance Agreements, Fiat, holding 20% of Chrysler at the date of the closing
of the Alliance agreements, had the right - conditioned upon the achievement of three separate Performance Events - to receive without consideration up
to a further 15% interest in Chrysler. These rights are valued at zero in the consolidated statement of financial position at 31 December 2010, consistently
with the accounting for the original 20% investment in Chrysler.
In particular, the first Performance Event occurs when Chrysler receives regulatory approval for an engine based on the Fiat FIRE family for manufacture in
U.S. and Chrysler commits to production. Chrysler received the required governmental approvals and achieved this Performance Event on 10 January 2011
by delivering to U.S. Treasury a letter in which it irrevocably committed to begin production of the FIRE engine in the U.S. Fiat currently holds 25% of Chrysler.
The second Performance Event will occur when Chrysler records aggregate revenues of US$1.5 billion or more outside NAFTA and enters into one or more
franchise agreements regarding the distribution in the Latin America region of Chrysler products. Finally, Fiat will receive the third tranche of 5% interest in
Chrysler when Chrysler receives regulatory approval for a vehicle based on Fiat platform or vehicle technology with at least 40 combined miles per gallon
and commits to commercial assembly in the U.S.
In addition to these rights, for any Performance Event that has not occurred by January 2013, Fiat may acquire the associated 5% equity tranches through
a primary call option (the “Alternative Call Option”). Fiat also has a second primary call option (the “Incremental Equity Call Option”) to acquire up to a further
16% of Chrysler’s equity, subject to a limit on Fiat’s ownership at 49.9% prior to full repayment of the U.S. Treasury and Canadian government loans.
Fiat may exercise these two call options from January 2013 to June 2016. The Incremental Equity Call Option may not be exercised until the Chrysler
aggregate principal of the two loans falls below approximately $4 billion. Fiat may exercise the Alternative Call Option or the Incremental Equity Call Option
prior to 1 January 2013 if the loans granted by the U.S. Treasury and the Government of Canada have been repaid and any other related commitment
terminated. Fiat also holds two secondary call options to purchase a portion of the membership interest held by the VEBA Trust, and the entirety of the
membership interest held by the U.S. Treasury at exercise prices determined in a manner consistent with those described below.