Chrysler CEO Sergio Marchionne with former UAW President Bob King who ran the union when it received its stake in Chrysler.
Plans for an initial public offering of Chrysler stock could be delayed until next year, Sergio Marchionne, the CEO of both Chrysler and its Italian partner Fiat now says.
Speaking to reporters during a visit to his hometown in Italy, Marchionne cautioned that he doesn’t know if work on the planned IPO can be completed before the North American International Auto Show in Detroit next January.
An IPO is “technically possible” in 2013 though it is increasingly likely to require waiting until 2014, according to the CEO. And that’s if one takes place at all. Though Marchionne initially expressed interest in offering Chrysler shares after Fiat came to the rescue of the U.S. automaker in 2009, he has since shied away from that approach, indicating a preference for having Chrysler completely taken over by its European ally.
Fiat now owns about 58.5% of Chrysler shares. But it has been locked in a debate with the United Auto Workers Union’s retiree medical trust, which owns the remaining stake, over pricing of the so-called VEBA’s shares. The final decision could come from a court in Delaware where Fiat has sued the UAW. The union, in turn, is pressing for the IPO.
There are, in fact, three options, the IPO, a direct sale to Fiat, or possibly even a sale of the union’s shares to a third party, explained Marchionne, noting that negotiations with the VEBA are continuing.
“We are still having chats but I don’t have a deal,” he said, suggesting that IPO process will set a “clear” value of the union’s holdings if an agreement hasn’t already been reached.
(Click Hereto check out spy shots of the 2015 Chrysler 200.)
Fiat’s apparent concern is that a public listing and sale of Chrysler shares may put the relationship between the two makers at risk even though Fiat owns a controlling interest in Chrysler. Divided ownership would interfere with the complete integration of the two companies, according to Marchionne, something that has been one of his primary goals since Chrysler emerged from bankruptcy in 2009.
Marchionne declined to comment specifically on the carmaker’s 2013 target but said he will update on forecasts at the end of the month, about the time Chrysler and Fiat release their individual third-quarter earnings reports. Marchionne also told reporters European car sales might recover starting next year though he doesn’t expect any “significant” rebound.
There are other reasons Marchionne hopes to do a complete takeover of Chrysler, as that move would give Fiat access to the U.S. company’s $12 billion in cash to help fund a turnaround in Europe where the Italian company is losing money and market share.
If Fiat and the UAW can resolve their differences, he has said he would like to merge the two manufacturers as early as next year.
(Chrysler sales surge despite US auto industry’s overall September slide. Click Herefor the full story.)
The VEBA received the holding as part of Chrysler’s government-backed recovery from bankruptcy in 2009. Although Fiat already has the right to buy the stake for about $6 billion, Marchionne has said that he’s seeking to pay much less. The legal dispute centers on Fiat’s offer of $139.7 million to acquire a 3.3% Chrysler stake from the labor group under an option agreement. The trust is demanding $342 million for the tranche.
Buoyed by a recovery in industry-wide U.S. car sales to pre-recession levels, Chrysler may be valued at $13.5 billion, which would make the health fund’s stake worth about $5.6 billion, according to estimates by UBS AG. Fiat may end up paying $4.9 billion to buy the trust’s holding because of an option allowing the Italian carmaker to purchase part of the stake at a lower price, analysts at the Swiss bank said in a research report in September.