Acknowledging it won’t recoup the full amount owed by the Old Chrysler, the U.S. Department of the Treasury said Thursday it received $560 million in proceeds from the sale of its remaining stake in Chrysler Group to Fiat.

With the closing of this transaction, the Treasury declared that it has fully exited its investment in Chrysler Group under the Troubled Asset Relief Program (TARP).

Federal officials recounted that Fiat paid $500 million to the Treasury for its 98,461 shares or 6 percent fully diluted equity interest in Chrysler Group. They added Fiat also paid $60 million to the Treasury for its rights under an agreement with the UAW retirement trust pertaining to the trust’s shares in Chrysler Group.

Continuing on, the Treasury also mentioned Fiat held a call option to purchase the Treasury’s equity interest in Chrysler Group. This option was exercisable for the 12 months following the repayment of the Treasury loan provided to Chrysler Group.

On May 24, officials pointed out Chrysler Group repaid $5.1 billion in TARP loans and terminated its ability to draw a remaining $2.1 billion TARP loan commitment. Three days later, Fiat notified the Treasury of Fiat’s irrevocable commitment to exercise its option to purchase Treasury’s 6 percent fully diluted equity interest in Chrysler Group.

Pursuant to the Call Option Agreement, the department explained the price for the 6 percent fully diluted equity interest in Chrysler Group was determined based on negotiation between Fiat and the Treasury.

Lazard served as the Treasury’s exclusive financial advisor on Thursday’s transaction.

The Treasury recollected that it committed a total of $12.5 billion to the Old Chrysler and Chrysler Group under TARP’s Automotive Industry Financing Program (AIFP).

With the closing of Thursday transaction and Chrysler Group’s repayment in full of its TARP loans in May, officials calculated more than $11.2 billion of that amount has been returned to taxpayers through principal repayments, interest and cancelled commitments.

However, officials conceded that the Treasury is unlikely to fully recover the difference of $1.3 billion owed by the Old Chrysler.

But, the Treasury did say that it has the right to recover proceeds from the disposition of the liquidation trust associated with the bankruptcy of the Old Chrysler, but it does not expect a material recovery from these assets.

Assistant secretary for financial stability Tim Massad gave an upbeat assessment about Thursday’s announcement.

“With today’s closing, the U.S. government has exited its investment in Chrysler at least six years earlier than expected,” Massad noted.

“This is a major accomplishment and further evidence of the success of the administration’s actions to assist the U.S. auto industry, which helped save a million jobs during the worst economic crisis since the Great Depression,” he added.

What Could Be Next for Fiat & Chrysler

According to a report from Bloomberg discussing Thursday’s Treasury announcement, a Goldman Sachs Group analyst attempted to project what will happen next, now that Fiat has an even larger stake in Chrysler.

“With the business strategies of Fiat and Chrysler irrevocably linked, we believe a merger is a logical next step,” Goldman Sachs’ Stefan Burgstaller wrote in a note to clients.

Bloomberg mentioned that Fiat, initially granted a 20-percent stake in Chrysler by the U.S. government, expects to hold 58.5 percent of the third-biggest U.S. automaker by the end of 2011, after getting 5 percent in return for developing a fuel-efficient vehicle for Chrysler.

The report also indicated the United Auto Workers union’s trust will have the remaining 41.5 percent of Chrysler at that time.