The Voluntary Employees Beneficiary Association (VEBA) healthcare trust, which is affiliated with the United Auto Workers union, is expected to present its argument in a Delaware on Monday, Nov. 12, 2012, in a legal dispute over the price Italian Fiat will pay for the first of several incremental stakes in Chrysler Group. VEBA healthcare trust holds a minority stake in Chrysler.
Fiat is eyeing to pay $139.7 million (EUR109 million) for the healthcare trust’s 3.3 percent stake in Chrysler. The payment figure is based on a formula created when Fiat took control of Chrysler as the latter came out of bankruptcy in 2009. Fiat and VEBA have yet to agree on the pricing of the stake in Chrysler. Investors are expected to keep an eye on VEBA’s filing on Monday to see how the trust values the stake it is selling.
Investors are also expected to look for any counterclaims from the VEBA that raise questions about the legitimacy of the 2009 contract with Fiat that governs the healthcare trust's sale of the stake.
The acquisition of VEBA’s stake could raise Fiat’s holdings in Chrysler from 58.5 percent to as much as 75 percent. This may eventually pave way to Fiat’s goal of effecting a merger with Chrysler.
Fiat is already controlling the management of Chrysler, but owning the US carmaker would allow it to restructure debt and ensure that Chrysler generates enough cash to back up Fiat's loss-making operations in Europe, analysts said.
Max Warburton, analyst at Bernstein Research, wrote in an October 10 report that it is in both sides' interests to find a way forward and it is inevitable that Fiat will eventually fully consolidate Chrysler, thereby allowing the Italian carmaker to restructure the subsidiary’s debt and pool cash. The VEBA is a healthcare trust for retired Chrysler union workers. The VEBA acquired a stake in Chrysler as part of the carmaker’s bankruptcy restructuring in 2009.