AUTOSHOW-UPDATE 4-Fiat raises Chrysler stake, readies for IPO

* Fiat raises stake in Chrysler to 25 pct

* Higher stake reflects terms of Chrysler bailout

* Marchionne: Meetings with bankers on IPO, debt in Q1 (Adds comments from Marchionne; background on bankruptcy, further executive comment)

By Deepa Seetharaman

DETROIT, Jan 10 (Reuters) - Italy's Fiat (FIA.MI) lifted its stake in Chrysler to 25 percent as Chief Executive Sergio Marchionne prepares for an upcoming round of meetings with bankers to refinance Chrysler's debt and ready an initial public offering of shares.

Fiat said in a statement on Monday that it had raised its ownership in Chrysler to 25 percent from 20 percent at no financial cost under the terms of a deal that was negotiated with the U.S. Treasury as part of Chrysler's bailout.

The announcement came as Chrysler showed off new and revamped vehicles at the Detroit auto show, including an all-new Chrysler 300 sedan and a remodeled version of the much-criticized Jeep Compass.

The success of the new Chrysler line-up is critical to improving both consumer and investor perceptions of the No. 3 U.S. automaker, which filed for a U.S. government-funded bankruptcy in 2009 and is planning an IPO this year.

"We've attacked the bulk of the product portfolio," Marchionne told reporters. "What we've got now is a commercially viable set of products in the marketplace."

Getting "traction" for Chrysler's product launches is key to paving the way for an IPO, Marchionne said.

Marchionne told Reuters Insider that he and other Chrysler executives would begin more intensive meetings with Wall Street bankers in the current quarter to prepare for the IPO expected by the end of the year.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Reuters Insider: Chrysler CEO Sergio Marchionne expects

an IPO by the fourth quarter 2011 and a hopes to have

a detailed plan outlined by Q2 2011:

link.reuters.com/bex55r

Reuters Insider: Chrysler to Meet 'Intensively' with

Banks:

link.reuters.com/qyz35r

Reuters Insider: Chrysler Design Chief Says Consumers

'Are Back in the Game':

link.reuters.com/bew35r

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The immediate priority will be to develop a plan to refinance Chrysler's bailout debt to the U.S. Treasury, Marchionne said.

"We have spent some time with the financial institutions the last two or three months and we are going to get into a much deeper discussion in the first quarter of 2011 as to how to get that done," Marchionne told Insider.

"I am expecting that by the second quarter of this year we will have a plan that we can announce," he said, speaking on the sidelines of the Detroit auto show.

Chrysler has also applied for low-interest loans from the U.S. Department of Energy, which the automaker had expected to receive by the end of 2010.

"We're working our way through discussions with (the Department of Energy). I'm not sure there's anything else I can do," Marchionne said.

CHRYSLER'S 'BUSINESS CARD'

Marchionne said he hoped that Fiat's progress in restructuring Chrysler since it took control of the automaker in 2009 would silence the skeptics and win over potential investors and creditors.

He said it was possible that a Chrysler IPO could come before the fourth quarter, but that would depend in part on the strength of the stock market. "I think we need to do some more work before we open our trap," he said.

In a roundtable with reporters, Marchionne said Chrysler would have to report a net profit for "a couple" of quarters before an offering.

He said Chrysler could still post a net profit without changing the company's debt structure. The automaker was carrying debt owed to the U.S. and Canadian governments valued at $7.4 billion at the end of September.

Separately, Chrysler brand chief Olivier Francois said the the new 300 sedan -- the brand's flagship sedan -- was critical to recouping Chrysler's credibility.

"The 300 will clearly be a driver of the building of the brand," said Chrysler brand President and CEO Francois in an interview. "The brand shares the same name of the company. It is kind of a business card."

Fiat shares closed up 1.4 percent at 7.55 euros. The Stoxx 600 European Autos index .SXAP was down 0.7 percent.

Chrysler executives said they hope the second-generation 300, which had been developed in part before the automaker's bankruptcy, would win back luxury consumers who would not have considered its vehicles in recent years.

The first-generation 300 was a smash debut for Chrysler five years ago, but the automaker was criticized for not investing enough in refinements to keep it competitive with newer full-size sedans from rivals like the Taurus from Ford Motor Co. (F.N)

Fiat was given management control of Chrysler and an initial 20 percent stake with the opportunity to raise its holdings to 35 percent by meeting certain performance targets set by the Obama administration.

By winning approval to build a Fiat-designed, fuel-efficient engine at a Chrysler plant in Dundee, Michigan, the Italian automaker was cleared to raise its stake in Chrysler to 25 percent.

If Fiat helps Chrysler increase sales outside North America and builds a vehicle in the United States that achieves 40 miles per gallon in fuel efficiency, the Italian automaker can raise its stake in Chrysler to 35 percent.

Fiat recently spun off its truck and tractor division, now known as Fiat Industrial. (FI.MI) That spin-off was seen as clearing the way for the creation of a bigger trans-Atlantic auto group led by Marchionne. (For more on the Detroit auto show: [ID:nN09216892] ) (Reporting by Deepa Seetharaman; Writing by Lisa Jucca, Helen Massy-Beresford and Kevin Krolicki, Editing by Matthew Lewis and Steve Orlofsky)