Chrysler Turns $14b Into $4.8b

According to Steve Rattner, Chrysler was such a sick puppy in the immediate pre-bailout period that it would have only generated about $1b had it been liquidated in bankruptcy. Thanks to around $14b in government assistance, however, Chrysler is now worth a whopping $4.8b according to a Reuters analysis of its filings. But wait, you say, how does Chrysler have a valuation if it hasn’t yet launched an IPO?

Chrysler arrived at the valuation to set pay for its top executives, including Marchionne. Senior executives are paid partly through so-called deferred phantom shares, which will convert to shares in the company at a later date.

In June 2009, each share was worth $1.66, according to the filing. By the end of 2010, the value of each share was $7.95.

But does this valuation actually mean anything?

In the February 25 filing, Chrysler said it arrived at the $7.95 figure through an “income approach.” Chrysler spokeswoman Eileen Wunderlich declined to expand beyond the filing.

So, technically Chrysler still hasn’t actually made nearly $10b go up in a puff of turnaround (and who’s counting the wealth destroyed in bankruptcy?). But since Fiat will probably buy up a controlling stake in Chrysler before an IPO, synergies could help the market bump Chrysler’s value up to a less galling figure. One analyst projects a $7b-$8b valuation, saying it could go even higher “if the market for cars takes off.” Unfortunately, given that gas prices are more likely to go up than are car sales and that Chrysler has the worst fleet fuel economy of any automaker, hoping for more than a $5b Chrysler valuation could be overly optimistic as well. In any case, Chrysler is not likely to be worth the amount of money the US put into it, a feat that, with a $51b current market valuation, GM has basically achieved (if only for the moment).