updated 4/12/2011 10:07:43 AM ET 2011-04-12T14:07:43

Fiat boosted its ownership stake in Chrysler Group LLC by 5 percent Tuesday as the Italian automaker met several benchmarks set by the U.S. government.

The company now owns 30 percent of Chrysler, and it can raise ownership to 35 percent by making a 40 mpg car in the U.S.

Fiat got a 20 percent stake in Chrysler when it took over management of the company after a government-funded bankruptcy in 2009, and the government set several benchmarks for Fiat to increase its stake. In exchange for the ownership stake, Chrysler got small-car and clean-engine technology and Fiat's management know-how.

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Fiat's share of the company rose to 25 percent in January when it met the first government benchmark by making a fuel-efficient four-cylinder engine at a factory in Dundee, Mich.

The stake granted Tuesday came because Fiat boosted Chrysler's sales outside North America, compensated Chrysler for Fiat's use of its technology and recruited dealers in Europe and Brazil to sell Chrysler cars and trucks.

Plans for the 40 mpg car already are in the works, and Sergio Marchionne, CEO of both Fiat and Chrysler, hopes to increase Fiat's stake to 35 percent by the end of this year.

Marchionne said he eventually wants to raise Fiat's ownership to 51 percent. It can buy another 16 percent once it has repaid loans from the U.S. and Canadian governments. Marchionne has in the past said he expected that to happen in 2011, but on Monday said that could slip into next year depending on when Chrysler is able to repay the loans. Chrysler is negotiating with banks to refinance the government loans.

In addition to Fiat, Chrysler's other owners include a United Auto Workers retiree health care trust fund at 59.2 percent, the U.S. government at 8.6 percent and the Canadian and Ontario governments at 2.2 percent.

Fiat's added 5 percent stake came proportionally from the other three owners.

Marchionne has said that Fiat wants to refinance its government loans before returning Chrysler to the public stock market. At first he thought the initial public offering could come late this year but recently has said it could be delayed.

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