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Fiat has signed an agreement to buy the remaining 41.46% stake it does not own in Chrysler Group from the UAW’s VEBA Trust (United Automobile Workers’ voluntary employee beneficiary association), according to Automotive News.

The deal is the final step needed to merge the two carmakers. VEBA will get US$3.65 billion for the stake, while Chrysler has agreed to separately make a total of US$700 million in four annual payments to the UAW’s trust fund.

With the payments, the UAW has agreed that its members will adopt the best practices in use in Fiat’s global plants, instead of those just in use within the US, a Chrysler source told Automotive News.

Fiat will pay the trust US$1.75 billion from cash on hand when the deal closes (expected to be on or before January 20), and there would be no need to make any capital increase through a public stock offering. Chrysler will contribute US$1.9 billion through a special dividend to complete the transaction for the 41.46% stake.

SERGIO MARCHIONNE

“In the life of every major organisation and its people, there are defining moments that go down in the history books,” said CEO Sergio Marchionne in a statement. “For Fiat and Chrysler, the agreement just reached with the VEBA is clearly one of those moments.”

Full Chrysler ownership will allow Marchionne to create a global player to better challenge General Motors and Volkswagen. He earlier estimated that Fiat and Chrysler combined would be the world’s seventh-largest carmaker.

In Europe, where the car market has dropped to a two-decade low, Fiat has been depending on Chrysler to sustain profit. Group net income, including minority holdings, amounted to 1.41 billion euro in 2012, Automotive News reports. Without the US carmaker, Fiat would have posted a loss of 1.04 billion euro.

Since it assumed operational control of Chrysler, which went bankrupt in 2009, Fiat – or Fiat-controlled Chrysler as a subsidiary – has spent more than US$6.3 billion to buy out other stakeholders and consolidate its ownership of the US carmaker.

In 2011, Fiat bought an additional 16% of Chrysler for US$1.27 billion and later paid the US Treasury US$500 million to buy out the government’s 6% stake. It bought the 1.5% of Chrysler owned by the Canadian government for US$125 million and spent US$75 million on an equity capture agreement it enacted.

Today’s announcement of another US$1.75 billion from Fiat and combined US$2.6 billion from Chrysler brings the total to just over US$6.3 billion to give Fiat 100% ownership of Chrysler stock.