Chrysler 2011 Annual Report Download - page 220

219
Consolidated
Financial Statements
at 31 December 2011
32. Guarantees granted, commitments and contingent liabilities
Guarantees granted
At 31 December 2011 the Group had pledged guarantees on the debt or commitments of third parties totalling €40 million (€35 million at 31 December
2010), as well as guarantees of €30 million on related party debt (€16 million at 31 December 2010).
With reference to Chrysler, in accordance with the terms of the Ally Auto Finance Operating Agreement (“Ally Agreement”), Ally provides wholesale and retail
financing to dealers and retail customers in the U.S., Canada and Mexico. Chrysler subsidises interest rates or cash payments required at the inception of
the financing arrangement, as a customer incentive, a practice known as “subvention.” The agreement with Ally is not exclusive. Ally provides consumer
and dealer financing to other manufacturers and Chrysler’s dealers and retail customers obtain financing, including some subvented financing, from other
financing sources. Under the agreement, however, Chrysler must offer all subvention programs to Ally, and is required to ensure that Ally finances a specified
minimum percentage of the vehicles it sells in North America under rate subvention programs in which it elects to participate. In addition, Chrysler may,
from time to time, offer lease products to retail customers through Ally, but Ally is not obligated to offer lease products. Under the Ally Agreement, Chrysler
is required to repurchase Ally-financed dealer inventory, upon certain triggering events and with certain exceptions, in the event of an actual or constructive
termination of a dealer’s franchise agreement (including in certain circumstances when Ally forecloses on all assets of a dealer securing financing provided
by Ally). These obligations exclude vehicles that have been damaged or altered, that are missing equipment or that have excessive mileage or an original
invoice date that is more than one year prior to the repurchase date. As of 31 December 2011, the maximum potential amount of future payments required
to be made to Ally under this guarantee was approximately €5.7 billion and was based on the aggregate repurchase value of eligible vehicles financed by
Ally in Chrysler’s U.S. and Canadian dealer stock. If vehicles are required to be repurchased under this arrangement, the total exposure would be reduced
to the extent the vehicles are able to be resold to another dealer.
The Ally Agreement is effective through 30 April 2013, with automatic one-year renewals unless either party elects not to renew.
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
Following the occurrence of the Ecological Event in early January 2012, at the date of this Annual report Fiat holds a 58.5% membership interest in Chrysler;
the remaining 41.5% is held by the VEBA Trust, the fund that provides health benefits to the employees of Chrysler who are no longer in service. In addition
Fiat is the holder of the VEBA Trust Call Option, pursuant to which it is entitled to acquire 40% of the membership interests originally issued to the VEBA
Trust, provided that Fiat is entitled to purchase no more than 8% of such membership interests in any six-month period. This option may be exercised from
1 July 2012 to 30 June 2016. For the VEBA Trust Call Option, prior to a Chrysler IPO the exercise price is to be determined using a defined market-based
multiple (the average multiple of a certain automotive manufacturers, not to exceed the trading multiple for Fiat) applied to Chrysler’s EBITDA for the four
recent quarters less Chrysler’s net industrial debt. If there has been a Chrysler IPO, the price is to be based on the trading price for Chrysler’s ordinary
shares.