By on November 26, 2013

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Though Chrysler-Fiat CEO Sergio Marchionne had previously said that an initial public offering of Chrysler stock could take place by the end of 2013, the Italian automaker announced that stock sale will not take place before the new year. ”The Board of Directors of Chrysler Group … has determined that it will not be practicable for Chrysler Group to launch and complete an initial public offering prior to the end of 2013,” Fiat said in a statement.

 

The sale could help resolve the dispute between Fiat and the UAW’s health benefits trust, which owns 41.% of Chrysler, over the valuation of that stake, but a delay in the IPO could also delay Fiat’s full acquisition of the Auburn Hills based automaker. Marchionne would like to merge Fiat and Chrysler to create the world’s 7th largest auto firm and give Fiat access to Chrysler’s profits. Chrysler had initially filed paperwork for an IPO in late September.

The Wall Street Journal reports that Chrysler would raise between 1.5 and 2 billion dollars with the IPO. That would give the company a market valuation of 9 to 12 billion dollars. Fiat declined to comment on the report.

Marchionne wants to merge the Fiat and Chrysler to create the world’s seventh-largest carmaker. Fiat has been hurt by the weak European market. The company’s plan to reduce losses in Europe depends on sharing technology, cash and dealer networks with Chrysler. The merger would also give Marchionne access to Chrysler’s profits and allow him to use that cash to shore up Fiat and expand its product offerings. The companies, while managed by the same people, must currently keep their finances separate.

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11 Comments on “Fiat Says No Chrysler IPO Before 2014...”


  • avatar
    Detroit-X

    Chrysler must do really well to continually have its cash stolen all the time, to be sent overseas. Is that what the U.S. bailout was for? I can’t imagine how nice that must feel for the employees.

    • 0 avatar
      danio3834

      Well, this time around at least we can say the foreign partner has a genuine interest in the health of both companies and actually merging the two into a functional unit. Daimler had little interest in that as we saw what they did with Chrysler’s offerings. Sergio has put significant investment into making Chrysler products world class, both Fiat and Chrysler actually need each other in today’s marketplace.

    • 0 avatar
      challenger2012

      I can see Chrysler money going to FIAT to expand their product line. What I don’t see is FIAT making the necessary factory closings and job cuts needed to stabilize the company. Ford, GM and Chrysler all had to make painful closings and jobs cuts. I don’t see this happening at FIAT. The Deal with FIAT was to take a control of a troubled company with no money paid by FIAT. The deal was not to stabilize Chrysler only to be raped and plundered, at the first opportunity. There must real changes at FIAT to save money and increase productivity before Chrysler money flows in. Maybe there needs to be government intervention, again to ensure a fair deal. I would bet with Chrysler stabilized, there are a few other auto companies that would love to get a hold of Jeep and Chrysler’s Truck business. How many car makers have the off road image that Jeep has? Ram trucks are damn good, too, not to mention the Mini-van sales are number 1 and Dodge’s car sales are up as well. Now, FIAT need Chrysler more than Chrysler needs FIAT.

      • 0 avatar
        Lou_BC

        @challenger2012 – Fiat in Europe is hamstrung by very socialistic governments and strong trade unions. They might not be allowed to close factories.
        An option that has surfaced is to build products in those EU factories for export to North America.

        Fiat does not need an expanded product line but a revamping of its current European line. “Fix It Again Tony” seems fitting for fiat more so than Ford’s “Found On Roadside Dead” acronym.

        • 0 avatar
          Lorenzo

          Have you looked at Fiat’s product line? Do you realize how old some of those platforms are? The European market is demographically shrinking, but the US/Western Hemisphere market is growing.

          Fiat needs new Americanized models for the US, and entirely different models in South America. High cost Europe, especially Italy, is not where they can be built economically, and Sergio knows it. That’s why he needs a merger of Chrysler and especially Fiat into a NEW company, to make it easier to shut down those “foreign” Italian plants from Iacocca’s cushy office in Auburn Hills.

          No, I’m not Peter DeLorenzo, and I’m not dissing Sergio. He’s a lousy auto company executive, but an exceptional money man – and it’s actually a brilliant plan – IF he can pull it off.

      • 0 avatar
        ect

        As a small correction the company name is Fiat Group Automobiles S.p.A. Not FIAT.

        For some reason, Chrysler attaches FIAT to the variuous 500 model names, but Fiat itself uses initial cap/lower case wherever it does business directly.

  • avatar
    OldandSlow

    FIAT has had a junk bond debt rating for the past couple of years. I fully expect Sergio to talk down, delay and if the IPO ever does occur, do whatever is necessary to sabotage the market value of Chrysler shares. He needs a merger on the cheap.

    What blows me away is the market value of Tesla versus all of Chrylser, Jeep and Dodge. It’s unbelievable.

    • 0 avatar
      jz78817

      Tesla-philes are rapidly becoming as annoying as rabid Apple fans.

    • 0 avatar
      danio3834

      Watching TSLA shares has been interesting. A lot of specualtion there and a very high stock value for a company that has yet to post a profit, even after sinking 40% in the past month or so. The short term speculators have been having a field day with it but the lustre seems to be wearing off with uncertain news recently.

    • 0 avatar
      Lorenzo

      Sergio has already started with changes to the financials of the IPO. He does, indeed need a merger on the cheap, but the VEBA has a maximum valuation of $5 billion, and they won’t budge, while Sergio doesn’t have the money to buy them out. An IPO would be even more expensive, with more parties to buy out and the market setting the stock price. It’ll be interesting to see how he gets out of the corner he’s in.

  • avatar
    motormouth

    I think that Marchionne would prefer to own 100% of Chrysler, but only at a favourable share price. The UAW VEBA is really rolling the dice with the IPO as it might achieve a better price-per-share than the original Fiat offer but going ahead with that could also mean share ownership is diluted across various new owners, pushing down the value of the stock as Fiat’s interest in 100% ownership dwindles as a result.

    I realize that the VEBA needs top dollar to benefit the 800,000 people relying on the trust for healthcare (and to cover the USD3 billion payment shortfall), but as the two OEMs continue to become more entwined, Marchionne can still operate the two companies as one with the current share holding.

    Beyond that, I think that Fiat has a decent plan, considering the horrible state of the Euro market. Increasing output of luxury vehicles at its European plants and exporting that product will deliver significantly larger margins than the Fiat mainstay of A- and B-segment vehicles, which will mean that Italian plants have a better chance of turning a profit. Also, a combined Fiat and Chrysler push into China is long overdue. Other European carmakers (VW, PSA, BMW, MB, etc) would be having a lot harder time if they weren’t selling in China and Fiat needs to do the same. Unfortunately the locally-built Viaggio (off a new platform, BTW) is getting lost in the glut of local saloons and producing the Cherokee there (off largely the same architecture) would play to the local market.

    Looking at the larger picture, Fiat and Chrysler, despite first impressions, are a good match up. Combined, they have a full model range that can be shared across the various brands and sold cross-market via existing dealer networks. Fiat has also invested a considerable sum in updating Chrysler production plants which has resulted in better vehicle quality and with the expected platform sharing, including the Quattroporte/Ghibli platform underpinning the next 300/Charger/Challenger and a Jeep-sourced Maser SUV, they have some good product in the pipeline that will cost less to develop and build.


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