Fiat rethinks alliance with Chrysler after IPO filing

Mon Sep 23, 2013 11:35pm EDT
 
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By Deepa Seetharaman and Bernie Woodall

DETROIT (Reuters) - Chrysler Group LLC was forced to file paperwork for an IPO by its second-biggest shareholder on Monday, escalating a spat with main owner Fiat SpA FIA.MI which said it could scale back its commitment to the U.S. automaker.

Fiat, which owns 58.5 percent of Chrysler, wants to take full control and buy out the rest of the stock owned by the United Auto Workers trust fund, but has balked at the more $5 billion being demanded.

In response, the UAW trust exercised a right enshrined in Chrysler's 2009 government-financed bankruptcy to go forward with an initial public offering, stepping up pressure on Sergio Marchionne, chief executive of both automakers, to reach a deal.

Bankers and analysts view the filing as a move by the UAW trust to extract a better offer from Fiat and many wager an IPO will never take place.

Fiat responded angrily in the filing, which raises critical questions about when and even if Marchionne can merge the two companies to form the world's seventh-largest auto group. The Fiat-Chrysler alliance was one of the centerpieces of the Obama administration's 2009 restructuring of the U.S. auto industry.

"Fiat has informed us that it is reconsidering the benefits and costs of further expanding its relationship with us," Chrysler said in its S-1 filing with the U.S. Securities and Exchange Commission.

Chrysler added that Fiat is also reconsidering the terms on which the Italian automaker will continue to share its technology, vehicle platforms, engineering expertise and other resources with Chrysler.

"Fiat 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. "It's a shot across the bow of the UAW."   Continued...

 
Chrysler Group LLC Chairman and CEO Sergio Marchionne answers questions from the media in downtown Detroit, Michigan in this file photo taken April 30, 2012. REUTERS/Rebecca Cook/Files