Family feud clouds Chrysler's future

The UAW, Chrysler Group's minority shareholder, threatens to go public in its fight with Fiat over company worth

Chrysler feud

2014 Ram 1500 pickup

Just four years removed from bankruptcy protection, Chrysler Group is worth a lot of money - some say up to $10 billion.

Just how much it’s worth is the centre of a battle between Sergio Marchionne, whose Fiat SpA owns 58.5% of the U.S. automaker and the United Auto Workers (UAW) trust fund, which owns the rest.

The UAW wants to sell at least part of its stake, but isn’t happy with what Fiat has offered. So it’s threatening to go to the stock market with an initial public offering (IPO) - something it is allowed to do under the terms of the 2009 government-sponsored bailout.

In a retaliatory move, Marchionne, who is CEO of both automotive groups, has cast doubt on Fiat’s willingness to continue sharing technology and vehicle platforms with Chrysler.

That, however, seems doubtful since it is Chrysler’s newfound success - and big profits - that is keeping the wolf from the door of the Italian automaker, still struggling through a European sales slump.

Under the terms of their alliance, Chrysler and Fiat must manage their finances separately, even though they are run by the same executive team. A full merger would make the company the world’s seventh biggest automaker.

Reuters news agency says the IPO is estimated at up to $100 million, but Chrysler has not said how many shares will be offered in the sale. The UAW trust fund intends to use the proceeds to pay for medical benefits for blue-collar Chrysler retirees.

The alliance has been beneficial for both companies, which is why Marchionne and Fiat want 100% of Chrysler. Since Fiat became the majority stakeholder in 2011, buying the shares held by the U.S. Treasury, Chrysler Group has brought some great new products to market. Among them are the critically acclaimed Ram pickup, an all new Jeep Grand Cherokee and the born again Dodge Dart compact car. And the Fiat nameplate has returned to North America with the cute and hot-selling 500 subcompact.

Many financial analysts believe the IPO is just a threat and that a deal will be reached - likely in the UAW’s favour. Until then negotiations - and the war of words - continue.

 

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