Sergio Marchionne. (Bill Pugliano / Getty Images)
Fiat SpA isn’t closer to reaching an agreement with a United Auto Workers retiree health-care trust over the Italian carmaker’s Chrysler Group LLC unit in the U.S., Chief Executive Officer Sergio Marchionne said Thursday.
Negotiations with the labor group should continue, Marchionne, who is CEO of both Fiat and Chrysler, told reporters in L’Aquila in the central Italian region of Abruzzo.
“We are still having chats but I don’t have a deal,” Marchionne said Thursday. The initial public offering process will set a “clear” value of the holding as an agreement isn’t closer, Marchionne said.
Chrysler filed for an IPO on Sept. 23 at the behest of retiree health-care trust, its other owner. Preparations for the stock sale may help resolve a pricing dispute over the trust’s stake that has prevented Marchionne, 61, from completing a full takeover of the U.S. company. At the same time, Turin-based Fiat has said an IPO of Chrysler may put the manufacturers’ relationship at risk.
Marchionne has spent the past four years working to combine Fiat and Auburn Hills-based Chrysler to create a global player with the scale to compete with Toyota Motor Corp., General Motors Co. and Volkswagen AG. He has offered the trust about $1 billion less than what the labor group is demanding for its stake. The two sides may go to trial in a Delaware court as late as 2015 to resolve the disagreement.
Marchionne said Thursday he doesn’t know if a deal could be agreed before Detroit’s North American International Auto Show in January. An IPO is “technically possible” in 2013 while it’s likely to be ready in 2014.
Marchionne declined to comment today on the carmaker’s 2013 target as he will update on forecasts at the end of the month, he said. Marchionne also said Europe car sales might recover starting next year though he doesn’t expect any “significant” rebound.
Buying the trust’s 41.5 percent holding in Chrysler would give Fiat access to the U.S. company’s $12 billion in cash to help fund a turnaround in Europe, where the Italian company is losing money and market share. Fiat owns the other 58.5 percent of Chrysler. Marchionne has said he wanted to merge the two manufacturers as early as next year.
The trust received the holding as part of Chrysler’s government-backed recovery from bankruptcy in 2009. Although Fiat already has the right to buy the stake for about $6 billion, Marchionne has said that he’s seeking to pay much less. The legal dispute centers on Fiat’s offer of $139.7 million to acquire a 3.3 percent Chrysler stake from the labor group under an option agreement. The trust is demanding $342 million for the tranche.
Buoyed by a recovery in industrywide U.S. car sales to pre- recession levels, Chrysler may be valued at $13.5 billion, which would make the health fund’s stake worth about $5.6 billion, according to estimates by UBS AG. Fiat may end up paying $4.9 billion to buy the trust’s holding because of an option allowing the Italian carmaker to purchase part of the stake at a lower price, analysts at the Swiss bank said in a research report in September.
Marchionne received an award today from authorities in Abruzzo, where he grew up before his family moved to Canada in the 1960s. Much of L’Aquila was destroyed by an earthquake in 2009 that killed hundreds of people. The building where Marchionne received the award is still under restoration.