UPDATE: Fiat To Seal Chrysler Deal As US Court Clears Obstacles

Fiat SpA (F.MI) said Wednesday it expects to sign soon the closing of its deal with Chrysler LLC after the U.S. Supreme Court late Tuesday rejected creditors' objections, paving the way for the U.S. car maker to emerge from bankruptcy reorganization.

Shares of Fiat gained on the news as investors had expected the court decision to be delayed by several days. At 0920 GMT, Fiat's shares were up 4.6% at EUR7.77 in Milan, outperforming the FTSE Mib index.

"The U.S. court news was a surprise," said Carlo Drago, analyst at Milan-based Centrosim.

Chrysler filed for bankruptcy on April 30 and the U.S. government said it was going to seek a solution in 60 days.

Tuesday's supreme court move is a key victory for the Obama administration as its plan to remake the American auto industry by pushing Chrysler and General Motors Corp. (GMGMQ) through quick restructuring under Chapter 11 bankruptcy proceedings. The government has already injected almost $9 billion in emergency funding into Chrysler since late last year.

As part of the reorganization plan, the new Chrysler will be owned 20% by Fiat, together with the U.S. and Canadian governments, while over 67% will be controlled by the United Auto Workers.

Fiat's 20% stake could increase to 35% if the new company meets benchmarks intended to ensure the development of fuel-efficent vehicles in the U.S., and it has the option to become the majority stakeholder once U.S. loans have been repaid.

The nine-member board of Chrysler will include Fiat Chief Executive Sergio Marchionne, who will hold the same post, Fiat Powertrain chief executive Alfredo Altavilla, as well as the former vice-chairman of ExxonMobil Lucio Noto.

Fiat will supply the U.S. automaker with engine technology and auto platforms as part of a non-cash agreement struck by Marchionne.

Equita analysts Wednesday noted that Fiat has the "not-too-easy" task of restructuring a company (Chrysler) that is losing about $100 million a day.

Company Web site: www.fiatgroup.com

-By Sabrina Cohen, Dow Jones Newswires, [phone]; [e-mail]

(Luca Casiraghi and Marco Fusi contributed to this story.)