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25 November 2013

Fiat and Chrysler take stock 

Italy’s Fiat, majority stakeholder of American carmaker Chrysler, would like to own the entire company. The only problem: the owner of the remaining 41.5 percent stake, a retirees’ healthcare fund controlled by the United Auto Workers (UAW) union, is holding out for the best price for its members.

A full merger with Chrysler would make Fiat the world’s seventh-largest automaker. While Fiat’s sales in Europe have been anemic in recent years, Chrysler’s sales in the U.S. have doubled since 2009.

Taking full ownership would ease Fiat’s financial management of both companies, while letting it access Chrysler's cash pool to help finance expansion of its product range.

The UAW believes an IPO might bring in the most money for its members, but Fiat wants to avoid Chrysler going public and prefers to strike a private deal.

Fiat now says an IPO, for which it reluctantly filed paperwork in September, will be impossible by the end of December. Meanwhile, a valuation established by the banks underwriting the offering could help both sides to agree on a fair price for the union trust's stake – which would end the need for the IPO altogether.

The issue highlights the legacy of the 2008-09 financial crisis, when the U.S. government helped broker the deal under which the union and Fiat rescued Chrysler by taking over the company.

A strengthened Fiat could challenge rivals like Volkswagen, Renault-Nissan and Peugeot in the European automotive marketplace. The irony: Less than a decade ago, General Motors paid 1.5 billion euros in cash to escape its obligation to buy Fiat’s auto business.