Fiat SpA is rethinking its commitment with Chrysler Group LLC after the American carmaker filed documents for an initial public offering Monday. Chrysler said in its S-1 filing with the United States Securities and Exchange Commission that it was informed by Fiat that the Italian carmaker is “reconsidering the benefits and costs of further expanding its relationship” with it.
Chrysler further said that Fiat is also reconsidering the terms on which the Italian carmaker will continue to share with the US company its “technology, vehicle architectures and platforms, distribution networks, production facilities and engineering and management resources.” An IPO would mean a derailment in Fiat’s plans to fully acquire Chrysler and merge with it to create a global company large enough to compete against leading carmakers.
Fiat, which owns 58.5 percent of Chrysler, is aiming to buy out the stake held by VEBA, a United Auto Workers trust fund. Fiat, however, thinks that VEBA’s over $5 billion asking price is too much. VEBA exercised in January 2013 a right engraved in the Chrysler’s bankruptcy agreement to sell part of its 41.5-percent stake through an IPO, in a bid to pressure Fiat-Chrysler chief executive Sergio Marchionne to agree to its terms.
Bankers and analysts see the IPO filing as a move by the trust to get a better offer from Fiat, with many of them betting that the offering will never occur. With Fiat expressing its displeasure with the filing, the carmaker 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. [source: automotive news - sub. required]