Union pushes for IPO at Chrysler, forces filing

24 Sep 2013

Chrysler filed for a public stock offering yesterday, after it came under pressure from its second-largest shareholder, a trust set up for provision of medical coverage for 115,000 retired autoworkers and their relatives.

The company's plan in the normal course would be an occasion to mark its exit from government bailout and bankruptcy in 2009.

However, it was acting only following stalled negotiations between Fiat, which controlled Chrysler, and the trust over the purchase of the trust's minority stake in Chrysler, according to the report.

The offering could be canceled in the event of Fiat and the trust reaching a deal.

The Detroit automakers had heavy financial responsibilities towards their retirees and yesterday, General Motors said it would raise money in the bond market to acquire preferred stock in the company owned by its retiree health care trust at a cost of $3.2 billion.

Chrysler's offering comes following an unusual conflict of interests, due to the  turnaround at Chrysler after the federal government guided it through bankruptcy four years ago.

The United Automobile Workers health care trust held the legal right to cash with its 41.5 per cent stake in Chrysler, thanks to a deal brokered in 2009 by the Obama administration's auto task force.

The deal, at the time was seen as a last effort to save the troubled automaker, as it sought to preserve the peace with the UAW.

Bloomberg reported that the shares were being offered by retiree health-care trust, VEBA, which owns the 41.5 per cent of Chrysler not held by Turin-based Fiat, according to a regulatory filing yesterday. The offering was for $100 million of stock.

VEBA, locked in a dispute with Fiat over the value of the company, was now turning to public-market investors to assess how much the Italian carmaker needed to pay for its stake. The group was seeking at least $1 billion in excess of what Fiat wanted to pay as Sergio Marchionne, chief executive of both Fiat and Chrysler, was pushing for merger of the two carmakers in a bid to create a global player with the scale to compete with Toyota Motor Corp, General Motors Co and Volkswagen AG.

Bloomberg quoted Richard Hilgert, an analyst with Morningstar Inc in Chicago as saying, the company was going through the motion of an IPO to come up with a market valuation on Chrysler.

He added UAW VEBA was going to use this as a basis for negotiations with Fiat to determine what price Fiat should pay for the UAW's stake.