ITALY: Uncertainty over Chrysler stake dispute hangs over Fiat
Reuters noted that shares in Fiat hit a six-month low on Tuesday after a US union health trust said the Italian carmaker must more than double the purchasing price for a further a 3.3% stake in Chrysler Group.
Fiat, which already controls 58.5% of Chrysler, wants to pay $139.7m for the additional stake, a figure reached by using a formula set up when Fiat took control of the then bankrupt group in 2009.
But the United Auto Workers-affiliated trust said the stake was worth at least $342m in documents filed in Delaware's Court of Chancery late on Monday.
"It is difficult to make an assessment right now. We need to wait for the court ruling to make an estimate of how much Fiat would have to pay for the Chrysler stake," a Milan-based trader told the news agency.
One central issue is how to evaluate unlisted Chrysler. Fiat and the trust agreed a complex formula in 2009 to determine the value of the Chrysler stake.
"What's for sure is that low Fiat share prices are helping the Italian company as the market stock price is one of the parameters used to calculate the cost of the Chrysler stake," the trader said.
Fiat declined to comment on the lawsuit, the latest twist in a long-running dispute over the value of Chrysler between the UAW trust and Sergio Marchionne, the chief executive of both Chrysler and Fiat.
Marchionne is looking to buy the trust's entire 41.5% stake in Chrysler and the outcome of the dispute would give an indication of how much this move would cost Fiat.
Shares in Fiat opened down to hit their lowest since mid-May after the trust's request. But they later turned around and were outperforming the market by 10:40 GMT on Tuesday after Italian magistrates asked a court to unfreeze Libyan holdings in Fiat and other Italian companies.
The trust, which Fiat has sued for failing to sell it the shares, said in the documents filed to the US court that Fiat's offer was "substantially below fair market value".
Fiat, which is struggling in its core European markets, claimed a clerical error in the agreement linked Chrysler's value to Fiat's now much healthier North American unit even though the parties intended it to be the parent. The UAW trust disagreed.
"Fiat's litigious action against (the trust) reduce the likelihood of an early solution on the price of their remaining 40% stake," Barclays said in a note this week.
Quarterly/fiscal full year results continued to roll in this week with a healthy uptick at Suzuki in 2012/3, the latest Japanese automaker to finally shrug off the combined effects of the double whamm...
As the middle of the year gets closer, the the European automotive marketplace isn't getting any easier. By last year, Western Europe's car market had lost 3m units since its 2007 peak (a heady 14.8m...
Ongoing sovereign debt crises across Europe are continuing to have a major impact on the Continent's automaking development, with 2007 production levels not expected to return until 2017, says analyst...
- Auto business confidence hit but holding up
- Recalls redux - the week that was
- Brexit could lift UK auto production – Asian view
- New Astra Sports Tourer & future Opel/Vauxhalls
- Driving the new Q30, and Infiniti future models
- General Motors re-thinks India strategy - report
- Mixed reaction to Tesla's latest plans
- Ford rolls out MY2017 smartphone integration
- Tesla drops Mobileye in wake of Autopilot issue
- Heat challenging as technology ramps up - ZF TRW