August 7, 2022

Chrysler Favors Stock Sale by U.A.W. Retiree Trust

Chrysler’s Italian partner Fiat has the option to buy the trust’s shares, which account for a 45.7 percent stake in the company, and forgo a public offering. But while the executive, Sergio Marchionne, acknowledged the possibility of a direct purchase, he said a stock offering appeared to be the most prudent exit strategy for the retirees.

“I still look at the I.P.O. as the easiest way to monetize it,” Mr. Marchionne said of the stake owned by the United Automobile Workers’ voluntary employee beneficiary association, or VEBA.

Speaking after President Obama’s visit to Chrysler’s Jeep assembly plant in this northern Ohio city, Mr. Marchionne also said that a Chrysler stock offering would probably not be done until 2012.

“I think we need an additional track record of performance,” he said.

The president’s visit came a day after Fiat agreed to pay $500 million to the Treasury Department to acquire the 6 percent ownership stake that American taxpayers have held in Chrysler since it emerged from bankruptcy two years ago.

In addition, Fiat paid $75 million to the United States and Canadian governments for the right to buy the big ownership stake held by VEBA.

Fiat’s deal to buy the Treasury shares will give the Italian company a 52 percent stake in Chrysler, and accelerate the integration of the two automakers. It also concluded the American government’s stewardship of Chrysler, the smallest of Detroit’s Big Three car makers. Mr. Marchionne is the head of both Fiat and Chrysler.

Chrysler and General Motors were rescued from financial collapse by the Bush and Obama administrations after the two companies ran out of operating funds in late 2008.

After the sale of its shares to Fiat, the government will have recouped about $11.2 billion of the $12.5 billion that it invested in Chrysler. The remaining $1.3 billion — which went to the corporate shell of “old Chrysler” — will most likely be written off.

The Canadian government also lent money to Chrysler and continues to hold a 1.7 percent stake in the company. Mr. Marchionne said that Fiat was currently in talks to acquire those shares.

Once that is completed, Fiat will essentially own all the Chrysler stock that is not held by the VEBA.

But while Fiat has the resources to acquire the shares of the health care trust, Mr. Marchionne said such a transaction could be prohibitively expensive.

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