Chrysler Group Chairman and CEO Sergio Marchionne (left) talks with Conner Avenue Assembly Plant employee Emidio Cardillo (centre) during a visit to the plant to celebrate the start of production of the 2013 SRT Viper on Jan., 10, 2013. (Photo: Chrysler)
DETROIT Chrysler Group is reluctantly preparing for an initial public offering of some of its shares.
The automaker is proceeding with the IPO after it failed to reach an agreement on the value of the stock with the retiree trust that owns it.
Chrysler shares havent been publicly traded since 1998, when the company merged with Daimler AG. The Auburn Hills, Mich.-based automaker is now majority owned by Italian automaker Fiat SpA.
The shares that will be sold are owned by a United Auto Workers-run trust that pays the health care costs for around 130,000 blue-collar Chrysler retirees. The trust owns a 41.5 per cent stake in Chrysler. It will get all of the proceeds from the IPO if it goes forward.
Sergio Marchionne, the CEO of both Fiat and Chrysler, has made it clear that he wants to buy up the UAWs share and combine Fiat and Chrysler. But the two sides have been unable to agree on a price. The trust has set the value of the stake at $4.27 billion, while Fiat says its worth $1.75 billion.
At the trusts request, Chrysler filed the paperwork with the U.S. Securities and Exchange Commission late Monday.
Last year, Fiat sued the trust in Delaware Chancery Court, saying a 3.3 per cent stake it wanted to buy was worth $139.7 million. The trust contended the shares were worth $200 million more than that. In July, a judge refused to set a price and said the issue would have to go to trial, a process that could take several more years.
RELATED: Fiat exercises option to buy more Chrysler stock but price dispute delays sale
The trust did not immediately respond to an email seeking comment. But it may have calculated that its shares are growing in value as Chryslers sales and profits improve with the economy. Chrysler reported its eighth straight quarterly profit in the April-June period, with net income up 16 per cent to $507 million. Worldwide sales were up 10 per cent to 643,000 vehicles.
Chrysler emphasized that the shares may never be publicly sold. The two sides could still reach an agreement on the price of the shares without an IPO.
There can be no assurance that any such offering will be made or as to the timing of any offering that is made, the company said in a statement emailed to The Associated Press.
The UAW and Detroits automakers Chrysler, Ford Motor Co. and General Motors Co. formed the trust in 2007 in order to take growing health care costs off the companies books. It currently has $52.4 billion in assets and pays the health care bills of more than 800,000 retirees and dependents.
Chrysler exited the U.S. public market 15 years ago, when Daimler acquired it. But the combination was a disaster, and Daimler sold most of Chrysler to private equity firm Cerberus Capital Management in 2007.
Cerberus hoped to stanch Chryslers losses and rebuild the company, but was stopped short by the recession, which caused U.S. car sales to plummet. Despite billions in loans from the U.S. government, Chrysler filed for bankruptcy protection in April 2009.
In a deal brokered by the U.S. government, Fiat took over Chryslers operations when it emerged from bankruptcy less than three months later. Fiat was given a 20 per cent stake in Chrysler but has gradually acquired more of the company.
Fiat shares Chryslers profits but cant use the Detroit automakers cash which now amounts to $11.9 billion for its own operations. Fiat wants access to that cash to help it cope with the severe sales downturn in Europe.
Marchionne has said Fiat has $13 billion in cash, some of which could be used to buy out the trust funds stake in Chrysler.
