Chrysler-Fiat spat escalates
US firm forced to file for IPO
as a move by the UAW trust to extract a better offer from Fiat and many wager an IPO will never take place.
Fiat responded angrily in the filing, which raises critical questions about when and even if Marchionne can merge the two companies to form the world’s seventh-largest auto group.
The Fiat-Chrysler alliance was one of the centrepieces of the Obama administration’s 2009 restructuring of the US auto industry.
‘‘Fiat has informed us that it is reconsidering the benefits and costs of further expanding its relationship with us,’’ Chrysler said in its S-1 filing with the US Securities and Exchange Commission (SEC).
Chrysler added that Fiat was also reconsidering the terms on which the Italian automaker will continue to share its technology, vehicle platforms, engineering expertise and other resources with Chrysler.
‘‘Fiat is saying that Chrysler is worth less if we don’t get that full integration,’’ said Richard Hilgert, an analyst with investment research firm Morningstar Inc. ‘‘It’s a shot across the bow of the UAW.’’
The IPO, which for the purposes of calculating the regulator’s registration fee was estimated at up to $100 million, will be underwritten by JPMorgan Chase & Co.
Marchionne said in mid-September that ‘‘if an IPO happens, it is likely to take place in the first quarter of 2014.’’
Chrysler did not say how many shares will be offered in the sale. The UAW trust fund intends to use the proceeds to pay for medical benefits for bluecollar Chrysler retirees.
Under Marchionne, Chrysler has mounted an unlikely comeback that has pushed its valuation to around $10 billion, according to some analyst estimates. The US automaker is now propping up Fiat’s bottom line, rather than the other way around.
Chrysler’s success has complicated Marchionne’s efforts to buy out the fund. The more than $5 billion price tag pushed for by adviser Brock Fiduciary represents the highest possible payout under the terms of the bankruptcy agreement.
Last week, Marchionne hired former US auto task force leader Ron Bloom, chief architect of Chrysler’s 2009 bankruptcy restructuring, to advise Fiat in its negotiations.
Bloom was instrumental in convincing the UAW to accept a stake in Chrysler as part of the bailout package. He also is advising Detroit retirees in the Detroit municipal bankruptcy.
Chrysler and Fiat currently are forced to manage their finances separately, even though they are run by the same executive team. A full merger would make it easier — but not automatic — to combine the cash pools of the two companies, giving Fiat more funds to expand its product line-up.
Chrysler, based in suburban Detroit, had cash and cash equivalents of $12.2 billion as of June 30. Its net profit in the first half of the year fell 21% to $764 million from $966 million in the previous year.