June 6, 2011 / 12:41 PM / in 6 years

Fiat CEO says no rush to buy VEBA's Chrysler stake

TURIN, Italy (Reuters) - Fiat SpA is in no rush to buy the remainder of Chrysler from a United Auto Workers trust fund and cannot be forced to launch a Chrysler IPO until 2013, Fiat Chief Executive Sergio Marchionne said.

<p>Sergio Marchionne speaks during a news conference at the Chrysler Casting Plant in Etobicoke May 30, 2011. REUTERS/Mike Cassese</p>

The Italian carmaker has increased its stake in Chrysler to 52 percent, raising speculation Marchionne may be aiming to take full control of Chrysler -- of which he is also chief executive.

The VEBA trust fund holds a 45.7 percent stake in the Detroit-based carmaker.

“We are not obliged to buy (the VEBA stake),” Marchionne told reporters on Monday.

“We have the right to buy a portion of their interest. We can start discussions in the second half of 2012. And they can’t force the company to launch an IPO before 2013, so we have a lot of headroom going forward,” Marchionne said.

The VEBA fund is not planning a quick exit from Chrysler and is looking at various options to cash in on its holding, sources familiar with its strategy told Reuters last week.

These include selling to an investor which could be Fiat or selling in a public share offering, the sources said.

Fiat, which has managed Chrysler since a 2009 bailout, took its stake in the number three U.S. carmaker past the 50 percent mark last week after the U.S. Treasury agreed to sell its remaining 6 percent holding for $500 million.

Fiat also agreed to pay $75 million for the right to buy all of VEBA’s stake for a capped “threshold amount” -- which was set at $4.25 billion in 2009, increasing at a 9 percent annual interest rate, so analysts say it has now risen to around $5 billion.

Fiat already had an option to buy 40 percent of the VEBA stake, starting in June 2012, and Marchionne said it had plenty of time to make up its mind.

“The dialogue (with VEBA) has always been open. But there has been nothing in particular about their position as shareholders in Chrysler,” Marchionne said.

Fiat has also offered $125 million to buy the Canadian government’s 1.7 percent stake in Chrysler, as Marchionne tries to strengthen Fiat’s grip on the company.

Analysts said the CEO’s latest moves are dampening prospects for a Chrysler IPO, which Fiat can block until January 2013.

“This sets up ... the distinct possibility that Chrysler may not be listed in an IPO. Rather we see a potential path in which Fiat negotiates to buy the remaining VEBA stake, either in cash or Fiat shares,” Barclays Capital analysts said in a report.

Reporting by Gianni Montani; Writing by Silvia Aloisi; Editing by David Holmes

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