Fiat and Chrysler are a step closer to being one and the same. In a statement issued today, Chrysler says it is issuing an initial public offering to distribute common share stock. If you’re not Gordon Gecko, we’ll explain what that means to you.
See, during Chrysler’s bankruptcy in 2009, 41.5 percent of the company was given to the Voluntary Employment Benefits Association (VEBA) trust fund that now oversees retirement plans for the United Auto Workers’ union. Fiat either purchased or absorbed 58.5 percent of the company over the last four years as it met milestones or simply bought up chunks of Chrysler. Since then, the two sides–Fiat and the UAW–have been trying to figure out how much the outstanding portion of Chrysler is worth to Fiat. Fiat thinks it’s closer to $3 billion; the UAW thinks it’s more like $5 billion. Neither has been able to come to an agreement, so an arbitrator has come in to help settle it.
Except the IPO will likely do the trick before then on the open market. All of the shares being sold belong to VEBA and will go back into the UAW’s retirement benefits program.
Fiat will likely buy up the majority of shares when Chrysler’s stock goes on the market. Fiat needs to; while it’s the majority shareholder, it’s not receiving all of the profits it could right now. That’s a bad thing since Fiat is bleeding in Europe in the wake of that continent’s massive recession. Chrysler has been a massive prop for Fiat, and owning all of Chrysler’s assets would allow the companies to sink more development dollars into one another so they could ultimately make better products.
JP Morgan will be doing the valuation of the stock. With Chrysler’s recent successes and immense growth since it emerged from bankruptcy, we wouldn’t be surprised to see its stock well above Fiat’s projections. We’ll certainly see here over the next few weeks when Chrysler grows that much closer to what has been a very good parent company for the Pentastar firm in Auburn Hills.