Chrysler files paperwork for IPO at request of UAW run trust
The shares are owned by a UAW-run trust that pays health care costs for 130,000 blue-collar Chrysler retirees.
United Auto Workers
DETROIT – Chrysler Group is reluctantly preparing for an initial public offering of some of its shares.
The automaker is proceeding with the IPO after it failed to reach an agreement on the value of the stock with the retiree trust that owns it.
Chrysler shares haven’t been publicly traded since 1998, when the company merged with Daimler AG. The Auburn Hills, Mich.-based automaker is now majority owned by Italian automaker Fiat SpA.
The shares that will be sold are owned by a United Auto Workers-run trust that pays the health care costs for around 130,000 blue-collar Chrysler retirees. The trust owns a 41.5% stake in Chrysler. It will get all of the proceeds from the IPO if it goes forward.
Sergio Marchionne, the CEO of both Fiat and Chrysler, has made it clear that he wants to buy up the UAW’s share and combine Fiat and Chrysler. But the two sides have been unable to agree on a price. The trust has set the value of the stake at $4.27 billion, while Fiat says it’s worth $1.75 billion.
At the trust’s request, Chrysler filed the paperwork with the US Securities and Exchange Commission late Monday.
Last year, Fiat sued the trust in Delaware Chancery Court, saying a 3.3% stake it wanted to buy was worth $139.7 million. The trust contended the shares were worth $200 million more than that. In July, a judge refused to set a price and said the issue would have to go to trial, a process that could take several more years.
The trust did not immediately respond to an email seeking comment. But it may have calculated that its shares are growing in value as Chrysler’s sales and profits improve with the economy. Chrysler reported its eighth straight quarterly profit in the April-June period, with net income up 16 per cent to $507 million. Worldwide sales were up 10% to 643,000 vehicles.
Chrysler emphasized that the shares may never be publicly sold. The two sides could still reach an agreement on the price of the shares without an IPO.
The UAW and Detroit’s automakers – Chrysler, Ford Motor Co. and General Motors Co. – formed the trust in 2007 in order to take growing health care costs off the companies’ books. It currently has $52.4 billion in assets and pays the health care bills of more than 800,000 retirees and dependents.
Fiat shares Chrysler’s profits but can’t use the Detroit automaker’s cash – which now amounts to $11.9 billion – for its own operations. Fiat wants access to that cash to help it cope with the severe sales downturn in Europe.
Marchionne has said Fiat has $13 billion in cash, some of which could be used to buy out the trust fund’s stake in Chrysler.
©The Associated Press