Italian carmaker Fiat has no need to gain access to the cash of its current American subsidiary Chrysler Group, according to Sergio Marchionne, chief executive of both auto companies. Chrysler currently has restrictions on the usage of its cash. These were implemented when the carmaker was refinancing loans from the United States and Canadian governments.
Marchionne said during a press conference in Detroit that there will have to be no covenants on the debt structure at Chrysler, adding that Fiat has to own over 80 percent of Chrysler. Fiat currently holds a 58.5-percent stake in Chrysler. Marchionne is planning to merge Fiat and Chrysler by 2015. Fiat’s plan to acquire the stake in Chrysler it currently does not own is being limited by a turnaround plan that the Italian carmaker divulged in October, Marchionne said.
The Italian carmaker is currently embroiled in a court dispute with a Chrysler minority shareholder in Fiat over the price that it has to pay to increase its stake in the US unit to nearly 62 percent. The minority shareholder -- Voluntary Employee Beneficiary Association (VEBA), a healthcare trust for retired United Auto Workers members – wants Fiat to pay at least $342 million for the stake, which is more than double the $139.7 million that the Italian carmaker is intending to shell out.
Fiat filed a lawsuit in Delaware Chancery Court in Sept. 29, 2012, to confirm the price that it has to pay. The VEBA filed its response on Nov. 13, 2012. With regards to the discrepancies in the stake price, Marchionne remarked that both parties are reading the option agreement in different ways, adding that it is up to the judge to decide.
Fiat’s CEO said that the court may issue a ruling by the end of 2012. As part of Chrysler's 2009 bankruptcy, Fiat was granted call options to purchase a portion of the VEBA's stake every six months, starting early 2012 through June 2016. The agreement covered 40 percent of the VEBA’s stake in Chrysler.