Fiat chief executive Sergio Marchionne has said the automaker would like to see the minority holder of affiliate Chrysler Group – the United Auto Workers union retiree healthcare trust called VEBA that owns 41% – sell out as soon as possible.
“The faster we do it, the better it is. It’s up to them,” Marchionne, told Reuters.
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Earlier this month, VEBA asked Chrysler to register 16.6% of its Chrysler shares for a future public offering, setting the stage for the US automaker to trade on the stock market again for the first time since 2007, when it was a Daimler unit, the report noted.
Marchionne said he would be “more than happy” to work toward making any future IPO a success, adding however he would prefer for Fiat to buy VEBA’s stake in Chrysler.
Fiat now owns 58.5% of Chrysler. Marchionne has said in the past that Fiat would like to buy the rest of Chrysler, Reuters noted.
The trust needs to pay medical benefits to 121,624 retired Chrysler workers and their families plus some 40,000 more in the future, according to VEBA.
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By GlobalDataAs part of Chrysler’s 2009 bankruptcy agreement, retired Chrysler workers exchanged about US$7bn of health care and life insurance liabilities for a stake in the collapsed company plus a promissory note for $4.8bn.
The UAW union is keen to see Chrysler hold an IPO, UAW vice president and director General Holiefield told Reuters recently.
“I would love to see Chrysler go public again,” he said. “The VEBA has to have the proper amount of funding to provide healthcare for our retirees.”
Holiefield and Marchionne worked together to produce the 2009 agreement that led to Chrysler’s present turnaround, each taking on risk along with US and Canadian taxpayers.
The healthcare trust’s stake – worthless when Chrysler exited bankruptcy – could now be worthbns of dollars, Reuters said, noting that investment bank UBS has estimated Chrysler’s market value at about $9bn based on trading multiples for competitors Ford and General Motors.
VEBA had a funding deficit of $5bn at the end of 2011, a report from UBS in November showed.
Marchionne said the question of when and how VEBA could trade its Chrysler stake for the funds it needs to pay retiree health care is “fundamentally a question of price.”
“I will tell you the secret – it’s called cash,” he said.
The report said Fiat and VEBA are at odds over the value of VEBA’s stake and are trying to settle the matter in a Delaware court. Fiat has offered $139.7m for a 3.3% stake that VEBA says is worth $342m.
“In the absence internally of any (solution) at Fiat (to buy the stake), we will be more than happy to accompany VEBA to an initial public offering,” Marchionne on Wednesday told analysts on a conference call.
“I will let VEBA go and float, and then deal with the (stock) overhang.”
Marchionne said Fiat does not plan to make any asset sales to fund the purchase. But he did not rule them out.
